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With the year slowly coming to a close and the holiday season approaching, many of us are asking “What do I get my children/grandchildren?” Many ideas go in and out of favor when it comes to games and technology. However, one financial gift idea for your children that survives the test of time is money.
Even though these may not be the most flamboyant gifts on Christmas morning, they may just be the most appreciated. (Although it may be a while before your child or grandchild can appreciate the gift.)
Some excellent financial gift ideas for children include:
Let’s cover each of these financial gifts a little more in-depth.
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This year, one of the best financial gift ideas for children is savings bonds.
Savings bonds are loans you make to the U.S. government; in this case, the loan goes in the name of your child or grandchild. They mature over a span of 20 years. At the end of this time, the government will return the loaned money to you.
During this time, the bonds may also pay out interest in the form of dividends. These interest payments may not make you rich immediately, but they can be a steady source of extra spending money throughout your child’s younger years.
The most common bonds to give as gifts to children are Series EE or Series I bonds. These bonds can be purchased in values ranging from $25 to $10,000 and are incremented at the level of the penny. The level of flexibility is ideal for people who have a very specific amount of money for a savings bond.
These bonds aren’t just great gifts – they can also help teach your children or grandchildren about bond investing.
To learn more about investing in bonds yourself, check out our article here!
Series EE bonds earn a fixed interest rate and are guaranteed to double in value no later than 20 years after they are given to the recipient. These bonds are bought on U.S. Treasury’s website, TreasuryDirect.gov.
Another option is to purchase Series I paper gift bonds when you file your first tax return. If you’re owed a refund, you can request to receive a portion of it invested into savings bonds.
I-Bonds mature to a value greater than on its certificate. They can have a fixed rate of return or a variable semiannual rate.
Even though it may not be the most personal gift on the list, cash is still a great option. For one, it’s one of the best ways to teach kids about money. You can give them varying amounts of money on different holidays and teach them about the value of a dollar and how to spend it.
Cash almost makes a great financial gift idea for children if they have a set goal in mind. For instance, you can teach them about saving for a specific item, such as an expensive toy.
Cash is an especially great gift for children entering their teen years. At some point during this time, they’ll start wanting money and gift cards instead of toys. This gives teens the option to spend their gift as they wish.
Through this experience, they will also learn to budget on their own, as well as how to start being responsible with their money.
(Are your kids ready to earn money on their own? What about your teenagers?)
As children get older, they often start to prefer gift cards over physical items on the holidays. This makes gift cards one of the best financial gift ideas for older children. It helps them learn how to use debit cards in the future, simulating the experience of having a set amount of money without being able to go over it, while also giving them freedom over their funds.
Gift cards are also great because you can choose whether or not they should be spent at a specific store. Today, many major banks and credit card companies offer a Visa gift card that functions like a debit card. Most can be spent almost anywhere – even online. These types of cards can also be used to teach your kids about how to safely shop online.
Kiva cards make a fantastic financial gift for children. Purchasing one of these cards shows a child how to use money while making the world a better place. With the money they make from their cards, they make small loans to people in developing countries that help individuals improve their lives.
With a Kiva gift card, you’re teaching your children about charity and goodwill with a simple purchase. Your kids can feel good knowing that they helped a person, family, or even whole community during a time of need.
Another one of the best financial gift ideas for children is to invest in their education early with a 529 college plan. Even though young kids won’t understand what this is, by the time they are ready for high school graduation, they will thank you.
529 contribution plans are great for adults, as well, as these state-funded loans come with tax advantages.
This gift is one great way to help your children financially in one of the most stressful times in their young lives. After all, it’s no secret that a college education is expensive. Moreover, average college costs have been increasing at about two times the rate of inflation each year.
With no end in sight to this trend, 529 plans are a great way to help your children or grandchildren further their education. First, however, you need to know which type of 529 plan you want to invest in savings or prepaid.
529 savings plans work similarly to 401Ks or IRAs in that your contributions are invested in mutual funds or other investment products.
For this to work, states coordinate with asset management companies. The asset management company handles the investment according to the state’s plan features, while the owner of the account deals with the asset management firm instead of the state.
The beneficiary of the account is the person for whom the account is set up. They can use the money for college and other allowable educational expenses.
Prepaid tuition plans are administered by states and higher education institutions. They allow families to plan for future college expenses by prepaying their child’s tuition.
This locks in today’s tuition rate and the program pays future college tuition at any of the state’s eligible institutions. Thus, this plan can be a great advantage for families who are worried about the effects of inflation and rising tuition costs. If a student goes out of state or to a private institution, an equal amount of money is distributed.
Stocks are a great financial gift idea for children because it teaches them how to start investing in the stock market. One share of stock can help catapult a child to become a lifelong investor. To start you can use websites like Give a Share or UniqueStockGift.com, which make the process easier.
You can make this financial gift even more personal by selecting a share in a company that your child or teen will recognize like Nike, Under Armour, Disney, etc.
On some websites, you can even get a frameable stock certificate. Kids will be able to say that they own part of a company and will enjoy watching their stock grow over time.
Also, when choosing this financial gift idea, consider choosing dividend-paying stocks to help teach another basic investing lesson. Children will be able to learn and understand the benefits of earning money on their investments in a more tangible way.
Plus, the fluctuation of prices and the accumulation of dividends over time shows them that you don’t have put your own capital in all the time. Dividend reinvestment programs can help them make money on their money on their money – a win for everyone!
The best financial gift ideas for children are the ones that are going to help your child, both in the short-term and the long-term.
First, figure out what you think is best for your child or grandchild. Make sure that this also aligns with your own personal financial goals if you plan to continue contributing to the funds, such as with tuition or a stock investing plan.
Finally, when you give these gifts, explain to your children how it helps them in the future. Teaching them how to be responsible with the funds they have now will only help in the long run.
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