Coming up with good gift ideas can be tough, especially during the holidays when shopping for many people. Giving money is often seen as less thoughtful than tangible gifts, but it’s time to rethink that. Nowadays, kids, adults, and grandparents often don’t need more stuff, and with a bit of creativity, you can give a financial gift that leaves a lasting impression.
If you’re looking for gift ideas for children, adults, parents, or relatives for any special occasion, consider these financial or investment gift ideas.
For children and teenagers, instead of toys, think about opening a 529 college savings account for them. Anyone can open one for someone else, and contributions are made after tax, allowing the money to grow tax-deferred. Withdrawals for qualifying educational expenses are tax-free. In 2023, the annual gift tax exclusion is $17,000 per person, increasing to $18,000 in 2024. This means friends, relatives, and grandparents can gift this amount without affecting their lifetime exemption. If you’re not the parent, it’s a good idea to discuss this plan with them to avoid over-funding the account, especially if the child’s future education plans are uncertain.
Recent IRS rule changes have made 529 plan contributions more flexible. Up to $10,000 per year can now be used for K-12 private school tuition, and starting in 2024, some beneficiaries can roll over excess funds into a Roth IRA. However, there are several rules and limitations to be aware of.
Did you know working teens can contribute to a Roth IRA? As long as they have earned income, they’re eligible to contribute. A parent or relative can make the contribution on their behalf. The annual investment limit for an IRA is the lesser of the child’s earned income or the IRS limit, which is $6,500 for 2023 and $7,000 in 2024. For those under 18, a custodial Roth IRA is needed. Roth IRAs are excellent for young workers because contributions grow tax-deferred and can be withdrawn tax-free in retirement.
When gifting, remember the contribution limits are individual-based, so coordinate with the parents since IRA contributions must be aggregated.
College is expensive, but supporting young adults in college can be a great gift. Depending on your family’s financial situation, you might consider making a significant gift that directly addresses financial struggles. Topics like money can be tough to discuss, but major financial stress-relieving gifts like mortgage payments, credit card payments, daycare, tuition payments, and student loan payments are incredibly helpful.
Credit card debt, with APRs over 20%, can quickly become overwhelming, especially with holiday expenses adding to the stress. For those looking to buy their first home, consider helping with a down payment. Always consult with your financial and tax advisor first to understand any tax implications.
For adults who aren’t struggling financially, consider giving experiences they wouldn’t splurge on themselves, like a vacation or fancy dinner. Experiences can create lasting memories, especially when shared with family.
While it’s easy to buy stuff online, giving a financial or investment-related gift requires more thought and sometimes coordination. Don’t hesitate to let the recipient know your plans if necessary; it doesn’t lessen the thoughtfulness or impact of the gift.