I just became a grandmother, and I want to set up a Roth IRA for my grandson to save for his college days. I don’t know where to start. Can you advise me?

Paul's Answer:

If you have at least $250 to invest, you can start by opening an account for your grandson in the TIAA-CREF Growth Equity Fund. This fund is relatively new, but it's run by an organization that has been managing money for school teachers and other public employees for more than 80 years. This fund's expenses are low and it's diversification is high.

However, you should not set up this account as a Roth IRA. Your grandson is ineligible for that unless he has legitimate earned income this year, and that seems unlikely. Instead, open a regular account with yourself or some other adult as a custodian for your grandson.

Add to this account when you can, and it should grow nicely into a college fund over the next 15 to 20 years.

Another alternative is to consider a 529 tuition program. This is an investment plan operated by a state designed to help families save for future college costs. It is named after a section of the federal tax code that provides benefits to participants. For information about these plans, visit www.savingforcollege.com. Near the bottom of that page, click on the FAQ link.

You sound like a generous grandparent, and you can do something even more important in addition to this investment. Make sure your grandson gets lots of educational experiences and opportunities between now and the time he's ready for college. Travel, museums, books, theater … there are all kinds of things that will have a big impact on his life. And as a grandparent you are in a perfect position to expose him to some of the more interesting things that life has to offer.

This will be good for him. And it will be good for you, too. Good luck!