Most states now offer “qualified tuition plans,” which are tax-deferred investment accounts. If such accounts are opened for your grandchildren, you can make contributions. Such accounts may be ideal for periodic birthday and holiday gifts. Why give your grandchild a $50 or a $100 check, which will go into the bank, where interest is taxable? Your grandchild will be better off if you put the same amount of money into a tax-sheltered state tuition plan.