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Financial Gifts for Loved Ones
Finding the perfect gift is hard. Something meaningful. Something you know your loved one will appreciate.
How about a financial gift?
From stocks to savings bonds, the payoff is often greater than the purchase price. And who doesn’t appreciate a crisp $100 bill or a college-fund donation?
We’ve compiled the ultimate financial gift guide with details about the most common financial gifts. From nieces to Grandpa, there’s something for everyone.
Gifting stock is a thoughtful and wise investment. A stock is an investment in a company and its profits. Units of stock are referred to as shares. Owners of stock are entitled to profits equal to the number of shares they own.
It’s fairly simple to purchase a stock for someone else. Obtain the name of the recipient’s broker, company, and account number — whether they use an online firm or an in-person broker. Select a stock of a well-performing company — even better if it’s your loved one’s favorite company, like Disney for young kids.
Make sure the recipient has an investment account to receive the stock. If the recipient is a minor, the share must be addressed to the minor’s guardian. Transfer the gifted stock from your account to the recipient’s account. If you don’t have an investment account, use a company like OneShare or GiveAShare to gift a share.
A stock can be the catalyst to motivate a loved one to become a life-long investor. There’s a lot to learn about the intricacies of stocks, so be sure to give an investing 101 book, as well.
U.S. Treasury savings bonds are one option for a financial investment gift. The Treasury sells two types of savings bonds: the EE bond and the I bond.
An EE bond is the most common savings bond. They accrue interest on a fixed rate and mature typically after 30 years.
An I bond doesn’t guarantee a return of value once it matures. The main benefit of an I bond is that it has a fixed rate and an adjustable inflation rate, which may impact its value.
Banks don’t sell bonds in person at branches anymore. To purchase a savings bond, create an account on the Treasury Department’s website, Treasury Direct. You can transfer a savings bond to the recipient after holding it in your account for five days.
Are savings bonds worth the investment? They offer minimal risk, but also minimal returns, so it’s up to you to decide.
One of the best long-term investments for your money is a college education. Starting or contributing to a loved one’s education fund is a great gift, considering rising tuition costs and the student loan debt crisis.
We spoke to Jack Schacht, the founder of My College Planning Team, about how to find the right savings plan for college. There are several different types of education savings accounts, but Schacht recommended contributing to a 529 savings plan, because of its advantages.
A 529 plan contribution is a tax-efficient way to build savings. The earlier contributions are made, the longer the education funds have to grow. Once funds are withdrawn from the 529 plan, 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 a college junior.
Schacht says “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 the student’s college plans.
While the 529 plan is a popular college fund, it’s not the only one:
- Uniform Gift to Minors Act (UGMA)
- Uniform Transfers to Minors Act (UTMA)
- Coverdell Education Savings Account (Coverdell ESA)
Consider a Uniform Gift to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA). These accounts offer more investment options, but 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 explains.
A Coverdell Education Savings Accounts (Coverdell ESA) is another type of trust set up to pay for qualified education expenses. But these offer their own set of pros and cons.
The financial life of employees is tied to their workplace through paychecks and benefits, so it makes sense for employers to reinvest in their dedicated workforce in a meaningful and impactful way this holiday. Employers interested in giving back should consider a financial wellness benefit.
“Many employers are bringing on financial wellness as an employee benefit, which brings the gift of financial confidence to employees of all ages and demographics,” says Brin Chartier of LearnLux.
Such programs offer many benefits.
“Workplace financial wellness programs can help alleviate financial stress, which is the number one cause of stress in the workplace,” Chartier says. “[It also can] encourage employees to hit their biggest goals like paying down student loans, raising their credit scores, saving to buy a house, funding their children’s education, and being able to comfortably retire on time.”
The magic of compounding interest makes retirement contributions an ideal gift for loved ones. Whether they’re recent grads or adults in the swing of their career, a retirement contribution is a gift that keeps on giving.
Determine if your loved one already uses a 401(k) or a Roth IRA account. If you contribute to someone else’s retirement account, that money counts against your tax-free gift limit. Remember, the annual inclusion is $15,000 per person in 2020 and 2021. Retirement accounts typically have their own contribution limits, which vary:
- $19,500 in 2020 for 401(k) plans
- $13,500 in 2020 for simple 401(k) plans
- $6,500 in 2020 for 401(k) catch-up contributions
It’s best to let these plans grow until retirement, but eventually, your contribution will pay off big. Thanks to compound interest.
Give your loved ones an extra nudge to secure their financial future. Financial professionals can help organize affairs and finances. This service is especially important for older individuals or those with dependents.
According to Patti Black, a certified financial planner, consider hiring an attorney to sort out 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,” says 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.”
And a financial planner can create a plan to achieve financial goals.
“Yes, the goals will change and the plans will change,” Black explains, “but as Dwight D. Eisenhower said, ‘plans are useless, but planning is indispensable.’”
The best gift for someone looking to commit to transforming their financial life is financial education. Think: books, games, apps, or programs.
Suze Orman offers money management products including classes, accompanying books, DVDs, and a success kit. Similarly, Dave Ramsey has a number of courses that cater to individuals and families. His most popular course, Financial Peace University includes more than 25 hours of instructional content focusing on getting out of debt, building wealth, and ending financial stress.
And don’t underestimate the value of self-guided learning through books and games. This is especially true for young children.
We spoke to Esther Diaz, founder of The Piggy Box about how financial education is impactful for young learners.
“Surveys have repeatedly shown that [a] majority of parents believe kids should start learning about personal finances between 5 and 8 years old,” Diaz says. “Research also shows that providing kids with hands-on experience with money at a young age is essential to preparing them for financial success.”
Cash won’t grow like other kinds of financial gifts — meaning it won’t gain value over time. But it’s a common and appreciated way to give to a loved one.
Most cash gifts fall below the annual tax exclusion threshold. And certain gifts are always nontaxable as designated by the IRS, including:
- Charitable gifts
- Gifts to political organizations
- Gifts between spouses
- Educational and medical gifts given directly to the medical or educational institution
Financial literacy gift ideas
In addition to monetary presents, the gift of financial education offers many benefits. Help your loved ones make smart financial decisions. Consider a highly rated gift that teaches financial principles — and don’t worry, there are fun options for all ages.
No. 1: Financial Peace Junior by Dave Ramsey
Ages: Three to 12 years
“Financial Peace Junior” is a book and activity kit for children, including games and toys to accompany the financial lessons. It teaches the money basics — earning, saving, spending, and giving. Kids will love tracking their progress on the dry erase boards. And parents will appreciate the step-by-step instructions and household chores ideas. Give the gift of financial literacy with a thoughtful resource to teach kids how to succeed with money from Dave Ramsey.
No. 2: Flocabulary
Ages: 10 to 18 years
Flocabulary is a learning program that uses educational hip-hop music to engage students. The curriculum uses a multisensory approach, combining music, rhythm, and rhyme with academic and culturally relevant content. Opt for the Flocabulary financial literacy lessons that cover topics like 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 hours a day, seven days a week.
No. 3: Grandpa Beck’s Cover Your Assets
Ages: Eight years and up
Cover Your Assets is a fast-paced, competitive investment card game perfect for the whole family. The goal is to amass a fortune by collecting matching pairs of cards and building a tower. But beware – competitors can steal each other’s top stack. A stolen stack increases in value and becomes more valuable with each subsequent steal. The only way to protect your assets is to build a larger tower of investments.
No. 4: Learn & Climb Play Money Set
Ages: Three years and up
Teach kids how to manage money without the risk. Learn & Climb is a realistic-looking play money set, including U.S. dollar bills, coins, debit and credit cards, and checkbooks. Kids can interact with the money without the risk of losing or damaging real cash. Pair it with a toy cash register for a thoughtful gift.
No. 5: Moonjar
Ages: Three months and up
Moonjar is a three-part moneybox bank for kids. The durable tin box has three separate compartments: spending, saving, and sharing. Children who receive money can choose whether to spend when appropriate, save for a goal, or share with a sibling or charity. Older children can practice more advanced math skills, such as calculating a percentage to allocate to each compartment. The Moonjar is a popular and timeless financial starter gift for kids.
No. 6: Payday
Ages: Seven years and up
Payday is a classic family board game. It will have you wondering where all the money keeps going – just like real life. Players collect salaries and pay bills while building a fortune. Lucky players will win the lottery, but others risk losing it all. At the end of the game, the player with the most assets, including cash and savings, wins.
No. 7: The Piggy Box
Ages: Four years and up
An updated classic, The Piggy Box teaches children how to be intentional with their money. It features three drawers, divided into saving, giving, and spending. The Piggy Box pairs with a user-friendly downloadable app to help parents and kids digitally track the money stored away.
No. 1: How to Turn $100 into $1,000,000
Ages: 10 to 14 years
The creators of Bill Nye the Science Guy and Biz Kid$ created a comprehensive kid’s guide to money. This humorous book engages young readers with financial basics and illustrations. It covers good decision-making, how to use money responsibly, and the foundations of financial literacy. Give the perfect gift for financially savvy kids.
No. 2: The Intelligent Investor by Benjamin Graham
Benjamin Graham is known as the godfather of investing. According to Jimmy Buffett, the 1949 edition of “The Intelligent Investor” is “the best book on investing ever written.” This book isn’t filled with motivational fluff, instead, it covers the fundamentals to get started investing without losing money. Readers will learn recommended investment strategies, how to analyze stocks, and a comprehensive history of the stock market.
No. 3: Principles: Life and Work by Ray Dalio
Ray Dalio documents his rules for success in his memoir, “Principles.” The memoir details lessons Dalio has learned throughout his career after founding Bridgewater Associates in 1975. These strategies can be applied to business and life — both professional and personal.
No. 4: The Richest Man in Babylon by George S. Clason
In this classic bestseller, George S. Cason writes about the secrets of the ancient Babylonians — the first people to discover the universal laws of prosperity. Readers will learn how to create, grow, and preserve wealth via the entertaining tales of merchants, tradesmen, and herdsmen.
No. 5: The Total Money Makeover by Dave Ramsey
Dave Ramsey is a personal finance guru, businessman, and author. Ramsey has written several New York Times bestsellers, including “The Total Money Makeover.” The book isn’t a get-rich-quick scheme. It explains how to pay off debt, build an emergency fund, and save money. Readers will appreciate the honest look at long-term transformation needed to build a better financial life and future.
No. 6: What It Takes: Lessons in the Pursuit of Excellence by Stephen A. Schwarzman
“What It Takes” is a memoir written by Stephen Schwarzman, the chairman, co-founder, and CEO of Blackstone. Schwarzman’s advice is applicable to everyone — from students to executives. If you’re interested in maximizing your potential, read the powerful — but still educational — stories and mantra.
No. 7: You Are a Badass At Making Money by Jen Sincero
Based on Sincero’s personal experiences, her second “Badass” book encourages readers to identify and end negative financial habits. Her financial ideas are easy and actionable. Readers will laugh, roll their eyes, and learn something thanks to Sincero’s candid, humorous style of writing.
No. 8: Your Money or Your Life by Vicki Robin and Joe Dominguez
“Your Money or Your Life” explains how savings issues stem from a negative relationship to money. The good news is that this relationship can be fixed, Just follow nine simple steps. Written by personal finance experts, Joe Dominguez and Vicki Robin, this classic challenges readers to re-examine their job, priorities, and ideas about money while establishing the habits needed to build wealth.
Stumped on financial gift ideas for your loved ones? Here are great options for all ages, so give the gift of better finances.
Patti Black has more than 20 years of experience helping affluent clients align their goals and their money. She 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. You can find her at Bridgeworth, LLC.
Brin Chartier is director of marketing at LearnLux, a leading provider of financial wellness for the modern workplace that blends digital tools and education with guidance from independent Financial Advisors. Chartier is passionate about branding, community building, and the work her company is doing to help employees feel so financially secure they forget it’s payday.
Esther Diaz is the founder of 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.
Jack Schacht is the founder of My College Planning Team, 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.