I’m sure you’ve noticed but in case you haven’t, December is a month filled with holiday traditions including the giving of gifts. Hard cash is the preferred gift for those between the ages of 10 and a million years of age but a part of me flinches to think that a week after Christmas, the money will be gone and likely whatever they bought with it. As a childless individual, I am slightly mortified by how much we hand over to children at this time of the year (note, I’m mortified but I still do it). I don’t think it really hit me until a nephew of mine pulled out his wallet one year and counted out $300 in cash and gift cards at a time when I was barely making it thanks to the beginning of the Recession. I doubt he was more than 12. I was appalled because I knew he would just go out and blow it and then be disappointed when it was all gone. If you’re set on making a monetary contribution, there are options beyond cold hard cash that could potentially provide more bang for the buck.
U.S. Savings Bonds. At one time, savings bonds were patriotic since they helped fund the war effort. Today, they are still useful if not as well respected. I used to stop by one of the bigger bank offices and pick up my form and exit with a receipt that would eventually be replaced with a bond. Today, you go to the TreasuryDirect.gov to start an account and then purchase bonds. (Note: You can also look to see if you are one of the thousands of people whose bonds have reached maturity but haven’t claimed them.) It’s a way of giving kids money that allows them to learn that there’s more to life than instant gratification.
529 College Savings Accounts. These have changed a fair amount since they first became available. The investment grows tax deferred, you remain in control of the account, they are low maintenance and flexible and they allow you to make substantial deposits. Washington doesn’t offer a 529 plan but does offer a GET (Guaranteed Education Tuition) for state residents.
Roth IRA. This is only available for children with earned income since the total amount placed into the account must be equal or less than earned income. That makes this option unusable for the younger set but can be a good option for teenagers working a part-time gig or adult children that need a boost for retirement savings.
Pay on a loan. We have all heard how much debt college kids face nowadays thanks to school loans. Rather than handing cash over, make a direct payment to a mortgage principle or school loan.
Obviously, we’re getting close to the end of all those holidays and so some of these ideas may not make sense for this year. Still, this is a good time to look back at this year and decide what you might do differently next year. A financial planner may have ideas or suggestions for the options I’ve listed above but he or she will have a better idea about your own personal circumstances and can help you to make your gift giving more meaningful to both you and your recipient.