4 Best Financial Gifts for Kids

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A person handing over a white box with red ribbon

Do you have nieces or nephews? Or do you have friends with children you’re close to? If so, you may wonder what to give them for the holiday season. Sure, you could get them the latest gadget or toy, but what about financial gifts for kids? While a financial contribution may seem like a dull present, it’s actually a smart way to help the young people in your life get a financial head start.

4 Best Financial Gifts for Kids

Many people buy toys for their nieces and nephews, but most kids already have too many toys. Yours will likely join a pile of the child’s other toys. Instead, consider getting a gift that keeps on giving through compounding interest. The child in your life might not appreciate the gift initially, but as they grow older and prepare for college and living independently, they will appreciate your foresight.

Stock

Set up a custodial account for your niece or nephew, add stock to it, and the money is theirs when they turn 18 to 21 (depending on the account). However, choose your stock wisely. If the child earns over $2,500, they must pay taxes at their parents’ tax bracket.

Valuable Coins

When I graduated from high school, my uncle gave me pristine half-dollar and dollar coins and told me to hold onto them. I planned to do just that—he assured me they’d be more valuable in several decades—but, unfortunately, my mom’s house was robbed, so we lost those coins.

If you want to give kids money but also want it to increase in value, coins might be the way to go.

Contribution to a 529 Plan

Another option is to contribute to the child’s 529 plan. If the child’s parents have already established a 529 account, they can give you a Ugift code. Then, you log in to the Ugift account and donate the money.

Sure, this isn’t the most exciting gift, but if it helps your nieces or nephews reduce or stay out of student loan debt, it is valuable. Even better, the earlier in the child’s life you give this gift, the more time compounding interest has to work.

Contribution to a UGMA Account

If you’d like more flexibility, consider contributing to a Uniformed Gifts to Minor Act (UGMA). Unlike 529 plans that can only be used for college expenses, UGMAs can be used for anything. The child assumes the account when they reach the appropriate age.

You can either contribute to a UGMA his parents already set up for him, or set one up if he doesn’t have an account. However, remember, the investment earnings are taxed under the minor as income.

Final Thoughts

If you’re financially savvy, one of the best financial gifts for kids is to share the knowledge and help your nieces and nephews become economically secure. You can do that by gifting them investments in one of the accounts mentioned above.

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