Key highlights
When families work together to pay for college:
- Students learn financial discipline: AP credits, academic scholarships and part-time work teach responsibility and develop skills for managing future family wealth.
- Parents can fund strategically: 529 plans and life insurance may provide tax-efficient funding options that align college costs with their own retirement planning and estate goals.
- Grandparents can maximize wealth transfer: Direct tuition payments, RMDs and 529 “superfunding” enable significant gifting while reducing taxable estates.
- Families unite around a shared goal: When all generations contribute strategically, college funding becomes a multigenerational wealth-planning tool that reinforces education as a core family value.
As children approach college age, there are many important decisions to be made about how to pay for their education. For wealthy families, the question isn’t about whether they can afford college—it’s how to fund it most efficiently while balancing retirement income planning, tax optimization and family legacy goals.
A four-year degree can cost well over six figures, particularly at elite private universities, and many families are planning for multiple children to attend top-tier institutions simultaneously.
Higher education costs represent a significant investment, and many parents assume that paying for their children’s college education falls mainly to them. But paying for college is a responsibility the entire family—kids, parents and grandparents—can share.
Student contributions teach financial responsibility
Griffin Geisler, a wealth strategist at RBC Wealth Management–U.S., recommends having students contribute to their education costs regardless of family wealth.
“It’s a learning opportunity,” he says. “Paying for part of their own education teaches kids financial responsibility and discipline—skills that become the foundation for how they’ll eventually steward the family’s wealth.”
There are several ways students can financially contribute to their own college education while developing valuable life skills, including:
Earn college credits in high school
By taking Advanced Placement (AP) courses or participating in special academic programs, students may be able to earn college credits while still in high school. AP courses and exam scores can also give students a competitive edge when applying for colleges and scholarships.
Apply for merit-based scholarships
Wealthy families often assume their children won’t qualify for college aid, but many scholarships are based on academic achievement rather than income. Geisler recommends researching these opportunities as early as freshman year—before students get busy with college applications and heavier course loads.
Gain professional experience
Internships and part-time jobs can offer more than modest income—their real value is in the industry exposure and network-building these early career experiences often provide. Students gain valuable insight into workplace dynamics and develop mentors, references and professional connections that can open doors after graduation.
Parents should integrate education funding with wealth strategy
Paying for college strategically requires an approach that optimizes tax efficiency and aligns with your retirement and estate-planning goals. There are many tools available, and your advisors can help determine how to leverage them most effectively. Here are options to explore:
529 plans
For parents, 529 plans offer flexibility and strategic control in planning for their children’s education. With no federal contribution limits, parents can fund the accounts with projected education costs up front, jumpstarting years of potential tax-free growth. Beyond college costs, 529 funds can be withdrawn tax-free for a variety of qualified education expenses, including K-12 private school tuition, tutoring and even graduate programs. Parents maintain ownership of the account—even after the child turns 18—giving them the ability to transfer any unused funds to another child or save them for future grandchildren.
Life insurance
Life insurance can serve dual purposes in high-net-worth families—wealth protection and strategic liquidity. Some permanent life insurance policies offer policyholders the flexibility to access the cash value of their policy through a loan or withdrawal. For families with significant illiquid assets, this may be a better option than forcing asset sales at inopportune times to pay tuition bills.
Grandparents can use education as a wealth transfer opportunity
Grandparents are in a unique position when it comes to education funding. It’s not just something nice they can do for their grandchildren—it’s also an effective wealth transfer and estate planning tool. This can be approached in multiple ways, including:
Direct tuition payments
Grandparents can pay unlimited amounts directly to educational institutions for tuition without those payments counting toward annual gift limits. That means, a grandparent could pay tuition directly to a university, then separately gift their grandchild the full annual exclusion amount for living expenses—all without gift-tax consequences. For grandparents with multiple grandchildren in college, this approach can facilitate considerable annual wealth transfers in a tax-efficient manner.
Required minimum distributions
Retirees who don’t need their required minimum distributions for living expenses can redirect those mandatory withdrawals toward grandchildren’s education. “RMDs create taxable income whether you need the money or not,” Geisler says. “Gifting those funds to a grandchild in college can be a great option.” Keep in mind that gifts beyond the annual exclusion amount will have gift tax implications unless paid directly to the school for tuition.
529 “superfunding”
Grandparents can front-load 529 contributions by giving up to five times the annual gift tax exclusion (10 times for a married couple) per grandchild in a single year. This strategically removes substantial assets from their taxable estate, especially when “superfunding” for multiple grandchildren.
A family investment
Education funding is more strategic and meaningful when approached as a collective family endeavor. When all generations contribute, paying for college becomes an opportunity to build financial discipline, optimize tax efficiency and purposefully transfer wealth. Most importantly, it establishes education as a core family value worthy of thoughtful planning and multigenerational investment.
“Families should start having conversations about college when kids are young so everyone understands their role and what is expected of them,” Geisler says.
Involving your advisory team in these multigenerational discussions helps align college funding with each generation’s broader financial goals and objectives. Because paying for college isn’t just an expense—when approached strategically, it’s an investment in a family’s future that can benefit everyone involved.