Financial Gifts for Loved Ones
Give the gift of a financial education this holiday season.
The final hours for holiday shopping are here! Haven’t secured a present for your loved ones that is both meaningful and useful? Don’t fret. We’ve compiled the ultimate holiday gift guide with ideas for a financial literacy-focused 2019.
Given the current volatile economy and uncertainty of retirement, Americans are more pessimistic about their financial futures now than ever before. It makes sense. More people are paying back student loan and credit card debt while simultaneously attempting to build wealth for future generations and invest for retirement.
Whether you’re shopping for a friend, family member, or getting a little something for yourself, these money-savvy gifts are a great option for everyone from young children to seniors this holiday season.
Financial games for young children
It’s important to set children on the right financial path as early as possible. While some high schools have dedicated personal finance curriculums, the majority of children pick up their financial habits from role models such as parents, grandparents, guardians, and peers. With this in mind, a helpful present for younger children is any toy, game, or activity that encourages financial literacy in a fun and memorable way.
We spoke with Esther Diaz, the founder of the Piggy Box, about why a financial education is so impactful for children and how her modern day piggy bank can help facilitate that knowledge.
“Surveys have repeatedly shown that [a] majority of parents believe kids should start learning about personal finances between 5 and 8 years old,” Diaz said. “Research also shows that providing kids with hands-on experience with money at a young age is essential to preparing them for financial success.”
The Piggy Box features three drawers with built-in organizers that make it simple for kids to sort and store different bills and coins. The drawers are divided into saving, giving, and spending in order to show kids that they must make intentional decisions about how to manage their money. Additionally, the Piggy Box pairs with a user-friendly downloadable app that helps parents and children digitally track the money stored away.
Selected as an Amazon’s Choice product, the Piggy Box is widely available and can be sent quickly and without hassle.
Another option geared towards older kids between the ages of 10 to 18 is the Flocabulary curriculum.
Flocabulary is a learning program that uses educational hip-hop music to engage students. With a multisensory approach that combines music, rhythm, and rhyme with academic and culturally relevant content, students are introduced to different subject matter with appealing lesson plans. This is probably why the standards-based videos, instructional activities, and additional resources are used by teachers at over 20,000 schools nationwide.
For personal finance, opt for the Flocabulary financial literacy lessons that cover personal finance topics including goal setting, budgeting, banking, debt and bankruptcy, choosing a career, student loans, taxes, and more.
The best part? It’s all digital. Flocabulary provides an instant digital subscription that gives users unlimited, streaming access to content 24/7. Gift givers will like the affordable individual plan options.
A college fund for students
Starting or contributing to a young person’s education fund is a great gift at any point in the year, but especially this winter in anticipation of college decisions! With rising tuition costs and a student loan debt problem, helping cover college expenses is a gift that’s sure to be appreciated by children and parents, alike.
For the 2017-2018 academic year, the average tuition price tag for an in-state public college was $25,290 and for a private college was $50,900. Students whose families can’t cover all education-related expenses, after financial aid and scholarship support, are often encouraged to take out student loans to make up the difference. As a result, 70 percent of students graduate with a significant amount of loan debt, with the average borrower holding $37,172.
It’s no surprise that older family members often decide to help students with higher education costs. We spoke to Jack Schacht, the founder of My College Planning Team, about how to find the right savings plan for college. Helping a student fund their college education is gift that will last a lifetime, but you will need to do your homework.
Before donating to a student’s college fund, have a family discussion. Surprises are nice, but you don’t want a large financial donation to backfire. Let the parents or guardians know your plans so that you can coordinate funding together. Talk about the student’s college goals and career plans. Are they staying in-state or going out-of-state? Does their chosen college or university distribute need- or merit-based scholarships? How will your contribution affect their FAFSA and eligibility?
There are several different types of education savings accounts, but Schacht recommended contributing to a 529 savings plan, because of its many advantages.
For grandparents in particular, the existence of a grandparent-owned 529 plan isn’t factored into the FAFSA for financial aid decisions. This means that “[e]arnings on your investments are tax-free, and 33 states also offer tax breaks on contributions,” Schacht said. “Furthermore, withdrawals aren’t taxed if the funds are used for qualified educational costs.”
On the other hand, once funds are withdrawn from the 529 plan to pay for tuition, the distribution is considered income that the student must claim on their FAFSA for two years. Keep this in mind because “eligibility for financial aid may suffer,” Schacht said. To get around this, some experts suggest waiting to withdraw from 529 plans until students are filing their last FAFSA as juniors.
Schacht reminds that “529 plans vary by state, and you do have the option of setting up an out-of-state plan that may offer more attractive features,” so it’s important to research and consider all alternatives based on your student’s tentative college plans.
While the 529 plan is a very popular college funding option, it’s not the only one, said Schacht.
“For example, you can also consider a Uniform Gift to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account,” he said.
These accounts offer more investment options, but do involve giving the student full control of the account when they’re of age.
“Another big problem with these accounts is that they are assessed as a child asset on the FAFSA and those assets are assessed at a much higher rate than those held by a parent,” Schacht explained.
Further, there are also Coverdell Education Savings Accounts (ESAs). These “offer a whole different set of pros and cons,” said Schacht.
If contributing to a traditional education fund isn’t for you, consider simply writing a check. A monetary gift, however, “may result in a tax event on your end or interfere with financial aid eligibility on theirs,” said Schacht. In order to avoid this pitfall, learn about the laws that govern monetary contributions of any kind given as a gift to another individual.
A tax-free money donation
A tax-free money gift is a great idea if you want to help out a student, friend, or family member with a monetary contribution towards a large purchase. Think college tuition, new car, wedding, honeymoon, or house.
You may be wondering how to give money to another person, if you’ll owe taxes on the money, and what the max is before it becomes taxable.
A monetary gift is considered something of value (cash, property, the use of property, etc.) given to an individual without the expectation of anything in return. Additionally, selling an item for significantly less than its actual value could be considered a gift. For example, selling your car to a family member for $5,000 less than it is worth as a favor would mean that the $5,000 difference could be considered a gift. It’s important to note that monetary support given to children or other dependents are not considered gifts, as long as the dependents are being claimed on the giver’s taxes.
Luckily, recipients of monetary contributions never pay a gift tax. And for givers, the limit at which the gift tax applies are high enough that most people will never have to worry about paying this tax. In fact, most presents given to friends and family fall well below the annual threshold for taxable gifts.
In 2018 and continued in 2019, a taxpayer can give up to $15,000 per person per year without being taxed on the financial gift. For example, this year you can give your friend $15,000, your brother $15,000, and your niece $15,000—all without being taxed. If however, you gave one person $16,000, you would then be taxed on the $1,000 that exceeded the tax-free limit.
The IRS does exclude certain gifts from the gift tax. The following gifts are never taxable:
- Charitable gifts
- Gifts to political organizations
- Gifts between spouses
- Educational and medical gifts given directly to the medical or educational institution
The best way to avoid the gift tax is to not exceed the yearly allowance. Overall, the gift tax doesn’t affect most people so don’t worry about giving $20, $100, or even $15,000—if you’re feeling generous—this holiday season.
Another notable mention is that individuals are able to do gift-splitting to get around the tax. If two grandparents want to gift one grandchild $30,000 they can do so without being taxed, so long as each grandparent gave $15,000.
Before making any decisions, be sure to consult a professional as necessary.
Financial education programs
If you hope to one day successfully manage money, stocks, or bonds, you’ll need practical knowledge and implementable skills. A solid education is the first step to a healthy financial future. The best gift for someone looking to commit to transforming their financial life next year is a dedicated financial education program. As such, consider buying an in-person or digital money course for your loved ones.
A course that covers financial topics such as money management, wealth building, saving for retirement, or investing for financial goals may be the best approach to learning financial concepts, practicing skills, and truly gaining life-changing knowledge.
Suze Orman offers several products for money management that includes classes, accompanying books, DVDs, and a success kit. For example, Suze’s Personal Finance Course promises to empower you to take control of your finances in seven easy-to-follow steps. With this online course, you’ll learn “to overcome your fears and financial obstacles, explore how to become debt free, save for retirement, invest for success, buy big ticket items, make finances a family affair and the must-haves to protecting yourself, your family, and your money.”
Similarly, Dave Ramsey has a number of courses that cater to individuals and families. His most popular course, Financial Peace University includes over 25 hours of instructional content that will teach you how to get out of debt, build wealth, and end financial stress.
Books on personal finance
Give the gift that keeps on giving with a book. What better way to celebrate learning and investing in one’s knowledge with a highly reviewed good read all about finances. The best part is that there are countless books to choose from, making it easy to shop for financial beginners and pros. Here’s a roundup of the top five personal finance books that should be on everyone’s shelf.
Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Vicki Robin and Joe Dominguez
This book doesn’t only have a catchy title! Your Money or Your Life outlines how most people’s savings problems start with their relationship to money. The good news is that this relationship can be fixed by following nine simple steps.
Written by personal finance experts, Joe Dominguez and Vicki Robin, this book has been updated several times since its publication in 2008. This classic challenges readers to re-examine their job, priorities, and ideas about money while establishing the habits needed to build wealth.
You Are a Badass At Making Money by Jen Sincero
Published in 2017, this is Sincero’s second “Badass” book that takes a more financial approach while delivering the same candid, humorous style of her first hit.
Based on Sincero’s personal experiences from both living cheaply to very well, the book is designed to help readers identify and stop the financial habits that hold them back. Understandable concepts are broken down and made easy to integrate into your own life. On the way, readers will laugh, roll their eyes, and hopefully learn something.
The Richest Man in Babylon by George S. Clason
George S. Cason writes about the secrets of the ancient Babylonians, the first people to discover the universal laws of prosperity, in his classic bestseller. Readers will learn how to create, grow, and preserve wealth by reading the entertaining tales of merchants, tradesmen, and herdsmen.
The Intelligent Investor by Benjamin Graham
Before Graham’s death, he was known as the godfather of investing. Even Jimmy Buffett said that the 1949 version of The Intelligent Investor was “the best book on investing ever written.”
This book doesn’t take the typical motivational approach to making millions, rather it teaches the reader all of the critical basics to get started investing without losing money. By the end, you’ll learn recommended strategies to investing, how to analyze stocks, and a comprehensive history all about the stock market.
The Total Money Makeover by Dave Ramsey
Everyone knows the name Dave Ramsey. He’s a personal finance guru, businessman, and author. In fact, the Dave Ramsey Show has more than eight million listeners each week, and for good reason! Ramsey has written several New York Times bestsellers, including The Total Money Makeover.
This book teaches how to effectively pay off debt so that you can build a foundation for saving enough money to not let emergencies derail your long term financial plans. It’s not a get-rich-quick scheme, but rather an honest look at how to transform your approach to finances in order to live your best financial future.
Prepay a financial professional
Stuck on what financial education gift will be most appreciated? If all else fails, you can’t go wrong with hiring a professional.
According to Patti Black, a certified financial planner, you should consider paying for a friend or family member to meet with an attorney and a financial planner to get their affairs and finances in order. This is an especially thoughtful gift for adult children who may need an extra nudge to take the next step in securing their financial futures, as well as those of their spouse and children. An attorney can help you set up a will, power of attorney, and healthcare power of attorney. Ultimately, it’s an important lesson in planning for the unexpected.
Pay for an attorney to get a will, power of attorney, and a health-care power of attorney. “These estate planning documents are so important and too many people don’t have them!” said Black, adding that “[if] you don’t have these documents in place, your state of residence will make decisions on your behalf and those decisions are usually not the ones you would have made.”
Pay for a financial planner to set and plan for financial goals. “Yes, the goals will change and the plans will change, but as Dwight D. Eisenhower said, ‘plans are useless, but planning is indispensable,’” Black explained.
Perhaps someone in your life could greatly benefit from sitting down with a professional and setting their affairs straight. Buying a month of appointments is an especially great gift for someone who is too hesitant or too busy to take that first step themself. With a prepaid month of appointments, they’ll surely take you up on the generous gift and get their lives in order however they see fit.
As a bonus, provide your giftee with a cheat sheet of how to prepare for their first appointment. Talk to them about questions they should come prepared to ask, financial goals they would like to achieve, and hesitancies they may have about drawing up legal contracts for decisions they’d like implemented on their behalf.
Patti Black has more than 20 years of experience helping affluent clients align their goals and their money. This work is especially important in times of transition such as starting a family, sending children to college, changing jobs, or retiring. Patti develops a customized financial plan that incorporates the clients’ needs, wants, and wishes while addressing employee benefits, income tax, insurance, investments, cash flow, and estate planning. Patti practices in a fee-only environment and is confident that the advice she gives is objective and geared towards her clients’ best interests. You can find her at Bridgeworth, LLC.
Esther Diaz is the founder of the the Piggy Box, a modern day piggy bank designed to help kids be money smart and generous. The Piggy Box is a fun and easy way for kids to manage money while teaching them sound budgeting principles and instilling ideas of “giving” at an early age. It rethinks and reimagines how and what we teach our kids about important life principles. You can find her on Facebook at @The Piggy Box – Modern Day Piggy Bank.
Jack Schacht is the founder of MyCollegePlanningTeam.com, a Naperville, Illinois, -based organization that brings together experts from both the academic and financial services communities who work in coordination to help families find the right college for the right price. You can find him on Facebook at @CollegePlanTeam.