It’s time for my annual suggestions for holiday gifts for your children and grandchildren. You might prefer to give them the latest toys or fashions, but where will those presents be a year from now? If instead, you make at least part of your gift a teaching opportunity about money, your gift will last a lifetime — or at least until college is fully paid.
The gift of a college education
Let’s start with the gift contribution to a 529 college savings account. Money in these accounts grows tax-free for college expenses, at any school in any state. And it can be used by any child in the family.
You can use your own state plan, a good idea if you get a state income tax deduction. For example, consider Illinois’ Bright Start Savings Plan (BrightStartSavings.com), which Morningstar recently named as one of the top five 529s in the country. Illinois residents can deduct up to $10,000 in contributions per individual, or $20,000 for married couples filing jointly, from their state income taxes.
But you don’t have to be a state resident to take advantage of Bright Start or any of the best-run plans in the country. Search them out at SavingforCollege.com, where plans are rated on performance and costs. You can apply directly using their links.
It’s easy to open a 529 College Savings Account, and you don’t need to pay a broker to do it. A parent or grandparent can be custodian of the account. After your initial deposit, you can add money every year for a birthday gift or on holidays. Investment decisions are simple. Most plans offer an age-based investment plan that gets more conservative as the child gets closer to college.
The gift of shares of stock
There’s no better way to teach investing than by purchasing a few shares of stock in a company that they child recognizes — whether it’s Nike, Apple or McDonalds. And it’s easy to buy those shares at Stockpile.com, which has a gift card program that allows you to purchase fractional shares in more than 1,000 stocks and ETFs with a $5 minimum investment. Each trade costs 99 cents, and you don’t get to set price limits on your purchase.
The child can follow the price movements in his or her own account online. You can make your gift by email, by printing out a gift card, or — if you act quickly — by having Stockpile mail you (or the recipient) a plastic “gift card” allowing the recipient to choose a stock. The giver doesn’t have to open an account to send the gift card — but a parent or custodian must be involved to redeem the gift by purchasing stock. One caveat: Don’t amass too much money in the custodial stock account or it will weigh heavily against the family in the financial aid formula for college!
The gift of starting early
My all-time favorite money gift for children old enough to count and know their coins is the piggy bank created by Susan Beacham of Money Savvy Generation (moneysavvy.com). This four-chambered translucent plastic piggy bank has sections labeled: Save, Spend, Donate and Invest. The piggy bank costs $19.99, and for an additional $2.99 you get a coloring book/workbook with money activities. Or you can buy it for $24.99 on Amazon, including shipping.
This year, they’ve even added a plush piggy puppet that announces the spend, save, donate and invest categories when you squeeze it! This is really starting early! MoneySavvy also publishes the MoneySavvy OMG guidebooks for teens, college students, and now couples — hitting everyone with some sound money advice. They are perfect stocking stuffers.
Apps that teach money
Finally, since they’re buried in technology all the time, consider these two free apps. The “Bank of Mom” app teaches money management through “lines of credit” on their allowance or pay them for chores. And the “Kids Money” app is a wonderful lesson in planning and saving for a big purchase like a bicycle or a new phone.
These are gifts that won’t be outgrown or forgotten when the holiday lights come down. And you’ll be glad you gave a gift of knowledge that will serve your precious children for a lifetime. That’s the Savage Truth.