The 5 Worst Mistakes Grandparents Can Make with Money

What you should do: There are a number of things to consider when creating a will, especially if you have several grandchildren, says Liz Krebs, a certified financial planner in Chicago. For example, “if you have grandchildren who span a lot of different ages, you might want to think about how an older grandchild gets treated versus one who is much younger, she says.

If your grandchildren are around the same age and in similar financial shape, you could set up your will so that they each inherit equal shares of your estate, says Kristen M. Lynn, an estate planning attorney with Green & Sklarz, a law firm in New Haven, Connecticut.

However, if you have a grandkid with a disability, or one who is struggling financially and needs more support than the others, you could take that into account when determining your distributions, Lynn says. If you leave a larger inheritance to one grandchild, she suggests including a letter to your family in your estate plan that explains your decision, to mitigate any misunderstandings or hard feelings.

3. Setting up a 529 without discussing it with your kids

If you plan to open 529 college savings accounts for your grandchildren, communication with your children is key.

For one thing, your kids may already have a 529 fund set up for your grandchild, and they might prefer you contribute to it rather than opening a new account. Even if that's not the case, it's important to be open about your plans, Krebs says. "Grandparents will set up a 529 for their grandchild, but they don’t talk about how much they’ll contribute to their kids, and their kids will think the grandparent is funding the [whole] 529,” she says. She recalls a client who discovered that their college-bound teenager only had $15,000 saved in the 529 that the grandparents set up — not nothing, but far from enough to fund a college education.

What you should do: Talk to your kids to see if they have a preference for how they'd like you to contribute to your grandchild’s college fund. Be transparent about how often you plan to contribute, and how much. “In general, people don’t like having money conversations, but if you’re going to set up a 529 for your grandchildren, this is one you have to have,” Krebs says.

And be aware that any contributions you make to a 529 plan will be considered a gift from you to the beneficiary in the eyes of the IRS. Annual gifts up to $18,000 ($19,000 in 2025), are not subject to the gift tax, so you may want to limit your yearly contributions, Raftopoulos says.

4. Co-signing a student loan for your grandchild

Some grandparents may feel obligated to co-sign a student loan for a grandchild whose parents have poor credit and thus don't qualify for a federal Parent PLUS Loan. Others may feel compelled to co-sign loan for grandchildren they are raising themselves.

No matter the rationale, this can be a risky move, says Jeffrey Wood, a certified financial planner and partner at Elysium Financial in South Jordan, Utah. If you default on a federal student loan, a portion of what you owe could be taken out of your Social Security benefits. A private lender can't garnish your benefits but can take a co-signer to court if the student defaults on a loan.

“Student loans are not something to be trifled with,” Wood says.

What you should do: Find other ways to help your grandchild pay for college. Contributing to a 529 plan is certainly one option. You could also offer to help your grandchild apply for scholarships and grants or offer to pay some of their tuition directly to their college. Under a federal tax code exemption, tuition payments made directly to a college aren't considered taxable gifts, no matter how large the payment, says Raftopoulos.

5. Not passing on your financial wisdom

You've got decades of financial experience and, hopefully, valuable financial wisdom. Passing it on to your grandchildren can help them learn good money habits and values. Unfortunately, some grandparents don’t take this step.

What you should do: Be open about how you've handled your finances over the years. That entails sharing not only your financial wins but also mistakes that taught you important money skills. 

“Grandparents can do a lot to educate their grandkids by just sitting down and talking to them,” Wood says. “It can mean a huge difference between people who are financially educated versus somebody thrown into adulthood like the majority of people.”