Some financial gifts to consider giving are 529 college savings contributions, shares of stock, custodial accounts, savings bonds, prepaid debit cards, and personal finance books can help teach moneyskills.
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Table of Contents
Table of Contents
Key Takeaways
Contributing to a 529 college savings plan can help a child save for future education expenses in a tax-advantaged way.
Giving shares of stock to a child can help teach them about investing, though stocks do carry risk.
Custodial accounts and savings bonds allow adults to gift money to a minor that they can access when they turn 18/21.
Prepaid debit cards and personal finance books can help teens start developing good money habits.
The annual gift tax exclusion allows you to give up to $18,000 per child per year without owing gift taxes. Consult a tax professional if gifting over that amount.
As we enter the holiday season, you're probably starting to brainstorm gift ideas for your friends and loved ones. Putting cash in a card can be an easy, generous way to show someone you appreciate them, but there are other money gift ideas that may come across as more personalized and meaningful.
Whether you're shopping for a baby or an adult, here are some ways to give money as a gift.
Financial Gifts for Kids & Babies
Some financial gifts can be valuable for babies and young kids because they'll have more time to potentially benefit from compound interest and the tax advantages offered by certain investment accounts. Here are some financial gifts to consider for this age range.
College Savings
Helping a child save for collegecan help reduce the amount they may one day have to borrow in student loans. 529 plancontributions grow tax-deferred and can be withdrawn tax-free as long as the money is used to pay for qualified higher education expenses.
Shares of Stock
Some kids may be excited to be a shareholder in one of their favorite companies. Purchasing a single share of stock for a child can help them learn about the stock market and potentially earn some money. Of course, this investment type can't guarantee growth, and may instead lose value over time. But even then it could still provide a learning opportunity.
Custodial Account
A custodial account is a financial account that's set up by and administered by an adult for a minor. Money that's deposited into a custodial account immediately and irrevocably becomes the property of the minor. When the child reaches the age of majority, they can take over control of the account. You could open a custodial savings account at a bank to give to a child as a gift.
A certificate of deposit (CD) is a federally insured investment that offers a fixed interest rate for a set period of time. Generally, CDs with longer term lengths earn higher rates of interest.
Savings Bonds
Savings bonds offer fixed or variable rates of interest, depending on which type of bond you have. Bonds can be a great gift for a baby or a young child because they are structured to reward long-term borrowers. Savings bonds can earn interest for up to 30 years.
Donation to a Charitable Organization
For kids who have everything, consider donating to a charity in their name. You may want to consider a children's hospital, a wildlife sanctuary or an organization that aligns with something the child is passionate about.
Financial Gifts for Teens & Adults
For teens and adults, you may want to consider financial gifts that can help them establish good money habits and build their personal finance skills. Here are a few suggestions to consider.
Prepaid Debit Cards
Prepaid debit cards are similar to gift cards, except that they can be used to withdraw cash, pay bills and shop at almost any retail store. The cards are also reloadable, so if you're shopping for a teen, this gift could help them develop good money habits. Prepaid debit cards often come with fees.
IRA Contribution
Do you want to help a teen get a head start on saving for retirement? You can open and manage an individual retirement account (IRA)for someone of any age, as long as they earn income from a job or self-employment, such as babysitting, mowing lawns or other service. You can contribute up to $7,000 per child, or the amount of the child's annual earnings, whichever is smaller.1
Personal Finance Books
Sometimes, the best financial gift is a gift of education. There are many personal finance books geared toward teens, covering topics like saving and investing, credit cards, budgeting and entrepreneurship.
Gift Tax Considerations
You can give fairly large financial gifts to a child without owing taxes on them. Grandparents who are in the estate planning processmay consider giving large gifts to reduce their taxable estate.
The annual gift tax exclusion amount is $18,000 ($36,000 for married couples) per child in 2024.2 Taxes can be complicated, so if you're planning on giving a large financial gift, you may want to consult with a tax professional.
The Bottom Line
Financial gifts can have a lasting impact on a person's life. Whether you're helping a child save for college or teaching a teen a valuable personal finance lesson, your gift can be an investment in their future.
Save, Invest, Grow Your Wealth!
Save, Invest, Grow Your Wealth!
Take control of your financial future by budgeting, saving, and investing wisely.
Some financial gifts to consider giving are 529 college savings contributions, shares of stock, custodial accounts, savings bonds, prepaid debit cards, and personal finance books can help teach money skills.
Treasure boxes. Any small box, tin, velvety jewelry box, or glasses case can be made special by decorating it and using it to store those secret treasures.
A gift tax is a government tax imposed on those who give money or property to others in exchange for nothing (or less than total value). There is typically a tax-free gift limit to family members until a donation exceeds $15,000 (jumping up to $16,000 in 2022). In these instances, the IRS is usually uninvolved.
You can use a trust to give money while you're alive, or to distribute your estate after your death. In some cases, using a trust can allow you to give to your children tax-free, while retaining limits on how the money is used or when they can access it.
For smaller gifts, the IRS rules for 2024 allow any individual to gift up to $18,000 per year to any recipient without having to consider the potential impact of a taxable gift. A married couple may give up to $36,000 to any individual.
For coworkers or acquaintances, people tend to spend around $30 to $50. For friends or distant relatives, many people spend between $50 and $100. For close friends or family members, most people spend between $100 and $200 or more.
The annual gift tax exclusion is a set dollar amount that you may give someone without needing to report it to the IRS. The threshold is typically adjusted to account for inflation each year. The IRS announced that the annual gift tax exclusion will be $18,000 in 2024, up from $17,000 in 2023.
Can my parents give me $100,000? Your parents can each give you up to $17,000 each in 2023 and it isn't taxed. However, any amount that exceeds that will need to be reported to the IRS by your parents and will count against their lifetime limit of $12.9 million.
As a gift solely from you to your child, a $30,000 wedding gift would avoid most tax liability on its own. The gift only exceeds the $17,000 annual exclusion for 2023 by $13,000, so that's all that could potentially be taxable if you're single.
A gift is something received for which you don't have to give anything in return. So, if she paid off the mortgage and in return is staying rent free, then the payment would be rent and would need to be reported on your tax return as such.
The primary way the IRS becomes aware of gifts is when you report them on form 709. You are required to report gifts to an individual over $17,000 on this form. This is how the IRS will generally become aware of a gift.
For 2024, the annual gift tax limit is $18,000. (That's up $1,000 from last year's limit since the gift tax is one of many tax amounts adjusted annually for inflation.) For married couples, the combined 2024 limit is $36,000.
From this perspective, if you are inclined to give, you should gift as much as you can comfortably afford during your lifetime, while remaining aware of the available step-up in capital gain basis for inherited assets. So, gift your assets that have minimal gains and save your most appreciated assets for inheritance.
May I deduct gifts on my income tax return? Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions).
In addition to direct gifts, the payment of a bill or expense on behalf of someone else is usually considered a gift. However, there are two specific exceptions. The IRS allows education expenses and medical expenses to be paid for someone without being considered a gift.
Therefore, one of the greatest gifts you can give your children is an appreciation for being content with what they have, who they are, and who they can become. 6. Curiosity. Teach your children to ask questions about who, what, where, how, why, and why not.
While most etiquette experts agree that $20-$30 is perfectly reasonable for a child's birthday gift, you can spend up to $100 on the child of a close friend or relative, says Helen Holden, founder of Counting Candles, a website that helps parents plan birthday parties.
“When determining whether to accept a gift from clients, counselors take into account the therapeutic relationship, the monetary value of the gift, the client's motivation for giving the gift, and the counselor's motivation for wanting to accept or decline the gift,” its guidelines state.
There are two things that gift-buyers should consider: the developmental level and interests of the child and the quality, safety and developmental-appropriateness of the gift.
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