Yes, the interest is taxable but if she's not earning money it won't matter... Be careful though, if you are on the account then you will have to pay.

529's are ok, I would suggest an Education Savings Account as they have many more options that 529s normally.

Good luck!

Hi Snewdi.

YES, there will be interest, and I agree that the Education Savings Account is the way to go. You could also buy her bonds that mature after a certain number of years. This is worth discussing with a financial advisor first.

Cheers.

If it is a regular bank savings account, the interest is taxable.

A better approach is to open a state section 529 college savings plan with you as the account owner and your granddaughter as the beneficiary. The interest earnings is deferred and ultimately tax-free if she uses the money for qualified higher education expenses (e.g., tuition, fees, room and board). Any contributions you make to the plan are removed from your estate.

Everyone who answered assumed that you want to save money for her education. Is that the goal, or are you wanting to save money so that she can purchase a home, a car, or pay for a wedding someday?

If so, a 529 account would not be a good choice since those accounts are intended for college costs.

thanks I will look into this