One of the great joys of your life may be your grandchildren, and you may want to help them financially as much as possible. The following sections outline a few common areas of financial assistance; use WORKSHEET 20-2 to brainstorm additional ways to help.

WORKSHEET 20-2

Paying Some College Costs

If your grandchildren's parents haven't already established a college savings account (including the tax-free ones), you may want to do that for your grandchild. You can then contribute regularly to it and in this way assist with his or her college costs.

Buying a Car

As your grandchild approaches the legal driving age, you may be tempted to buy him or her a car. If the child's parents approve and you can afford it, giving a car is an extremely thoughtful way to help your grandchild.

However, to avoid having your grandchild face the same financial problems that his or her parents may face, you may want to steer clear of luxury or sports cars. A used, safe, midsize or economy car (or, better yet, high mpg hybrid car) will be a welcome gift that won't set your grandchild up for financial disappointment later in life.

Helping with a Down Payment on a House

As your grandchild enters young adulthood, you may want to help him or her save for a down payment on a house. However, instead of giving a handout, consider creating a Grandma or Grandpa Matching Fund.

Each month your grandchild sends you a set amount of money to save toward a down payment. Each month you put that check, plus a check of your own for the same amount, into a savings or investment account that's in the names of both you and your grandchild. When the account grows to a certain amount, your grandchild can withdraw it and use it as a down payment on a house.

This way you'll teach your grandchild a great deal about saving and budgeting, and you'll be helping out but won't be providing a no-strings-attached gift.