Smart Holiday Gifts for Kids: Financial Advisor Tips

The holiday season is here. That means it’s time to find the perfect gifts for the kids we love. Many people already have more toys and gadgets than they can use. Because of this, any new items will likely be forgotten in a few months.

This year, consider balancing your shopping spree with a financial gift that could make a lasting impact.

Contribute to Their Education Fund

Cash gifts can be spent quickly, especially by kids. However, saving money for their future education can help reduce the financial burden they will face later.

If they already have a 529 college savings plan, consider adding to it with a cash contribution. Even modest yearly deposits can grow into a significant amount by the time they finish high school.

For example, if you earn an average return of 8 percent, a yearly contribution of $500 could grow to over $20,000. This would happen by the time a newborn today turns 18.

Make a Charitable Donation

Instead of just giving traditional gifts, consider creating a personalized certificate that lets the kids in your family donate the value of a gift to a charity they choose.  It’s a great way to build empathy and teach the joy of giving. It also shows children of all ages why it’s important to support others.

This can start important talks about your family's values. It also gives you a chance to spend quality time together. You can explore different causes, like fighting poverty, protecting animals, or funding research for serious illnesses.

Making charitable donations can even become a cherished holiday tradition. Choose a night during the festive season to sit down as a family and decide on a cause to support. Allow everyone to suggest a nonprofit or project, and then take a vote to determine which one you'll help that year.

Invest in a Financial Planning Session

Young adults often have big dreams, but they also face financial pressures like student loans and credit card debt. With limited resources, navigating their financial future can be a challenge.

By covering the cost of a session with a financial advisor, you can help a young person take their first steps toward financial stability. A financial advisor provides a neutral, non-judgmental space where they can discuss their goals and concerns openly.

The advisor can offer guidance on paying down debt while building savings for both short- and long-term objectives. They can also stress the need for an emergency fund. This fund helps manage unexpected challenges like job loss or illness. It helps to ensure they do not risk their financial future.

Helping young adults in your life build good saving habits is important. It also helps them see the value of long-term planning. This can help lead to lifelong financial security.

Gift Them a Share of Stock

Giving the gift of stock can be more exciting than it sounds.

Minors cannot buy stocks on their own. You can open a custodial account in their name and manage this account until they become adults. Any gains are taxed at the child's lower rate, and once they come of age, ownership transfers to them.

Younger kids can have fun starting with stocks from companies they know. These might be a favorite movie studio, a video game maker, or a tech brand they love.

If you want to transfer large amounts of assets, think about setting up a Uniform Gifts for Minors Account (UGMA) or Uniform Transfers to Minors Account (UTMA). These accounts allow minors to hold securities and other assets under a custodian's supervision until they reach adulthood.

Contribute to an IRA

If the teenager or young adult in your life has a job—whether it's babysitting, a part-time gig, or seasonal work—they’re eligible to start an Individual Retirement Account (IRA). You can make a big impact by matching their contributions or even funding an account for them.

For those under 18, a custodial IRA is required, which you manage until they reach adulthood. Contributions can match the amount they earned during the year, with a cap of $6,500 for 2023 and $7,000 for 2024. So, if they earned $2,000 from a summer job, you can contribute up to that amount to their IRA.

Retirement may feel far away for young people. However, putting money into an IRA teaches the value of patience. It also shows the benefits of growth over time.

Bottom Line

This holiday season, consider giving gifts that go beyond the latest gadgets or toys. Financial gifts, like helping with an education fund or supporting a charity, have long-term benefits. They also teach important lessons about responsibility and planning. By thinking beyond traditional presents, you’re giving them something that can truly last a lifetime.

Sources:

https://blog.massmutual.com/planning/financial-gifts-kids

Disclosures:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information