Dear Millie,

This holiday season I want my parents to give my kids money for college rather than physical gifts, but they don’t want to. They love watching the kids opening an actual 

gift. How do I get them to see that college savings are more important?  

We get it. It’s gratifying to watch a child scream with joy as they unwrap a gift—and a donation to a child’s college fund, however helpful, is unlikely to garner such a gleeful reaction. But make this point to Mom and Dad: Gifting money for college could change your child’s life, whereas that toy truck may be quickly forgotten.

The best way to broach this difficult topic is to schedule a time to talk to your parents and to begin by saying how grateful you are that they are so generous to your children each holiday season. Then, slowly ease into talking about how much it would mean for their grandchild’s future if they could give a little to the child’s college fund.

Numbers, here, will be powerful: The average tuition right now is more than $10,000 per year at a public university, and more than $42,000 at a private university, and those prices are rising. You might also note that the average student now graduates with about $37,000 in debt.

If they agree, one great option is to have them contribute to a 529 plan—a tax-advantaged savings account designed specifically for higher education expenses—that you set up in your child’s name. Grandparents can contribute up to $18,000 (or $36,000 for a couple) each year without incurring federal gift taxes.

They can also give $75,000 ($150,000 for a couple) upfront without gift-tax consequences if they don’t give again for five years. Other options include establishing a Coverdell Education Savings Account, which works much like a 529 plan, with the exception that the total yearly contribution cannot exceed $2,000. The main difference is that the money in a 529 plan can be used only for tuition, whereas the money in a Coverdell can be used for both tuition and expenses.  

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