Give the gift of a bright financial future this holiday season

Your kids and grandkids may have the latest videogame or trendy new kicks on their holiday wish lists, but there are several longer lasting gifts that could help set them up for bright financial futures. Following are financially friendly gift ideas for younger and older children.

For babies and toddlers: The gift of college via a 529 Plan

For very young children, who will likely get as much joy out of the box a new toy came in as the toy itself, consider the gift of a 529, or Qualified Tuition Program. It’s a tax-advantaged way to save for future college expenses sponsored by a state, state agency, or educational institution. There are plans available in all 50 states and the District of Columbia—plus you can invest in any state’s 529 and funds may be used at almost any school in the country. There are two types of 529 plans: College Savings Plans and Prepaid Tuition Plans. Funds in a 529 plan grow tax-deferred, and withdrawals are tax-free as long as the withdrawals are used for the student’s qualified higher education expenses.

For elementary age kids: The gift of financial literacy

With younger children, you can begin teaching the fundamentals of personal income and of developing a plan for saving, spending, and donating through your choice of gifts. Gift a piggy bank that has sections for each of these activities and start them off with a small amount of money in each section. Use the holidays to discuss something they’d like to save for—such as a new toy or a trip to the aquarium—and where they might like to donate once they reach a certain monetary goal. Set a date to shop for or experience what the child selects and discuss how it feels to work toward, and attain, a financial goal.

Introduce donating and the personal reward of philanthropy by helping the child research different charitable organizations. Spend time together identifying which one(s) appeal to him or her, then make a donation at the holidays in his or her name. Pair a smaller physical gift with the donation information. For example, if the child chooses to support an animal charity, gift a stuffed animal along with information about the impact he/she made. 

For older children: The gift of investments

Investing in stocks or bonds on behalf of children is a great way to help teach them the fundamentals of investing and get them off on the right financial footing as they prepare to enter the workforce. In 2022, you can gift up to $16,000 per year, per person, including stock. Stocks can be gifted via a custodial brokerage account and when the child comes of age according to the state where they live, they’ll be granted full control of the account. If a child has earned income, gifts can be made into a Roth IRA up to their total earnings in 2022. Roth IRAs are particularly advantageous because they grow tax-free! Another gifting option is bonds, which grow slower but are less risky for the long haul. They can be purchased and sent electronically on TreasuryDirect.gov, or you can opt to buy a paper bond.

Like donations for younger children, when gifting stocks or bonds, invest in a company that has meaning to the child and consider pairing the gift with a physical gift. For example, if buying stock in a technology company, put a computer gaming accessory made by the company under the tree for them to open.

It’s year-end tax saving and planning time! Download and/or print our guide.