By Richard Eisenberg, Next Avenue Editor
One holiday gift for your children and grandchildren that won’t require you to worry about supply-chain disruptions and delivery delays: the gift of teaching them about money.
To help you with some ideas — whether your kids or grandkids are six or 26 — my “Friends Talk Money” podcast co-hosts and I just released an episode about our favorite money gifts and I’d like to share some of those here. (You can hear the episode wherever you get your podcasts.)
By money gifts, we weren’t necessarily talking about handing out cash. Rather, we were suggesting a variety of ways your kids and grandkids can become smarter about saving, investing, budgeting and debt.
“Financial education is huge,” said “Friends Talk Money” co-host Pam Krueger, founder of the Wealthramp financial adviser vetting service. “It gives us, as a grandparent or an aunt, a way to start conversations around the whole concept of planting a seed, watering the tree and watching it grow.”
Terry Savage’s All-Time Favorite Gift
In the podcast, we also offer recommendations for parents and grandparents who’d like to assist in paying for kids’ college educations. In fact, “Friends Talk Money” co-host Terry Savage, the noted personal finance columnist and author, said her “all-time favorite gift” is the gift of a college education.
She noted that the best way to do this is through a tax-sheltered 529 college savings plan, administered by states.
“The money deposited in these accounts grows tax-free to be used for college in any state,” Savage explained. “And what’s great is you can make additional contributions for every birthday or holiday, helping the fund grow over the years.”
The Internal Revenue Service allows you to put up to $15,000 into a 529 plan this year without any pesky gift or estate tax consequences. Some states offer a state tax break for 529 contributions, too.
The best website to research 529 plans, Savage said, is the independent resource for parents, Savingforcollege.com. It ranks 529 plans for every state.
One caveat: If you open a 529 plan as the plan’s custodian for a grandchild, there could be a negative impact on financial aid for the child when college tuition bills are due, Savage noted.
I opened 529 plans for my two sons when they were small and am so glad I did. The savings that built up in them went a long way to helping my wife and I pay for the two college tuitions.
Incidentally, as I mentioned on the podcast, you can also buy what’s known as the “Gift of College” gift card at about 3,000 retailers around the country, including Target
Teaching Kids About Investing by Buying a Stock
Savage’s second favorite gift for kids and grandkids: the gift of stock investing by buying shares in companies they know.
The website Stockpile.com is set up to do just that. With as little as $5, you open an account for a minor and designate the purchase of any of more than 1,000 stocks and Exchange-Traded Funds (ETFs) by sending a gift card of $1 to $100. “Or the child can choose the stock when you send the gift card,” said Savage. There are no trading fees.
Stockpile, Savage added, also has a “delightful online tutorial” to introduce kids to the principles of investing and about risk and reward.
A bonus: You might get an education yourself by learning from your child or grandchild about companies and parts of the economy that they’re more familiar with than you are.
Acorns and Piggy Banks
An alternative gift for a teen or twentysomething, suggested by Savage, is the Acorns.com app and its “Round-Ups” feature. When the child buys something with a credit card or debit card, the app rounds up the price to the nearest dollar. Then, once that extra money amounts to $5, Acorns puts it into a diversified ETF for the child.
For younger kids, Savage recommends the “Money Savvy Piggy Bank” created by a mom of two, Susan Beacham (it costs $21.99; $24.98 with a family activity and coloring book, too).
“This is a four-chambered piggy bank and the chambers are clearly labeled Save, Spend, Donate and Invest,” said Savage. Added Krueger: “Those are the kinds of things kids remember, because they touch it and feel it.”
I’m especially pleased to see that “Donate” is one of the Money Savvy Piggy Bank’s options, since the bank introduces kids to the idea of helping the less fortunate.
Savage also likes the savings advice and online financial education for young kids at the Fitzsimonscu.com site from the Fitzsimons credit union.
My 5 Money Gift Ideas for Kids and Grandkids
Five financial gift ideas for kids and grandkids that I offer on the podcast:
- A subscription to Kiplinger personal finance magazine ($29.95 a year) or its free email newsletters or to the Money.com free email newsletters
- Beth Kobliner’s books “Get a Financial Life: Personal Finance in Your Twenties and Thirties” and “Make Your Kid a Money Genius (Even If You’re Not)”
- U.S. government savings bonds known as I bonds (because they’re tied to inflation), now paying 7.12%; Next Avenue wrote about I bondsrecently
- A Roth IRA, so the kids can save some of their employment income and put it towards their eventual retirement
- Using the Venmo app to easily transfer money from your bank account to theirs — especially helpful for pizza runs at college
Also, financial adviser Lazetta Rainey Braxton recently wrote a useful Next Avenue piece for Gen X parents, with ideas to help them raise financially astute children.
Only 9% of Americans age 55+ use holiday gatherings with family members as an opportunity to talk about money, according to a recent Wells Fargo