According to a recent poll by MetLife, grandparents bestowed $370 billion on their grandchildren from 2003 through 2008. Here are strategies to help you make the most of your generosity:
1. Set Up a Roth IRA For a Working Grandchild
If your grandchild has earned income, you can fund a Roth IRA for her. Say you add $2,000 to her Roth IRA each year from the age of 15 to 25 (a total of $20,000). Assuming that money grows at an annualized 6 percent until she turns 70, your $20,000 in gifts could be worth nearly $385,000.
2. Help Them Save for a Car or Home
Ask your grandchild what she hopes to save up for, and offer to become her cosaver. Think of this like a 401(k) match: For every dollar she saves, you'll match 25 cents or a dollar.
3. Give Experiences, Not Things
Studies show that happiness comes more from pleasurable experiences than from objects. Give gifts you can enjoy together—tickets to a ball game, a jaunt to the city to hit a museum or the theater, or a getaway at your home to spend the weekend together. Time, after all, is the most precious gift you can ever give to those you love.
Suze Orman's new book is The Money Class: Learn to Create Your New American Dream (Spiegel & Grau).
More Great Financial Advice From Suze Orman: