With the holidays coming up, it’s time to start thinking about what to get for your grandkids. There are a lot of “hot” items out there, and kids get excited thinking about what they’ll unwrap. However, the truth is that a hot toy today is old news in three months. Instead of giving your grandchild a $40 toy that eventually breaks or gets ignored, give him or her a gift for the future. Here are 5 financial gifts that keep on giving:
529 Plan Contribution
With the cost of college on the rise, you can contribute to your grandchild’s future with a 529 contribution. Your contribution can reduce the amount he or she has to borrow later on. An even better idea is to make the contribution a regular part of your gift-giving. For every birthday, holiday, or milestone that requires a gift, make another contribution to your grandchild’s 529.
Your contributions, invested in the 529, will grow over time, thanks to the power of compound interest. While your own contributions probably aren’t enough to fund a college education by themselves, when added to other contributions made to the 529, they will help. This can be a great way for your gift to keep on giving.
You can give stocks as gifts to your grandkids. A share in a solid company that your grandchild might recognize can make a great gift. Over time, that company’s stock has the potential to rise in value — and provide a solid return for your grandchild.
This can be a fun gift, too, since many companies will still print out paper certificates for a small fee. You can have the certificate printed out and framed, and your grandchild will still have something to unwrap. Not only can this be a great gift, but it can also prompt a good discussion about investing, and allow you the chance to teach your child solid financial principles.
If you aren’t sure about stocks, you can give bonds. Treasury bonds and savings bonds can make great gifts. The potential returns aren’t as high as stocks, but they are still investments that can keep giving in the future. As with stocks, it’s possible to have gift versions of certificates printed out in order to provide the recipients with something physical to open as part of the gift-giving festivities.
You can even continue to give bonds (and stocks) for various occasions, helping your grandchild’s portfolio grow over time. The returns for the future will be much higher than a few months of enjoyment with a toy.
Coverdell Savings Account
This is another great way to help put money toward your child’s education. You can contribute to an existing account, or open one for your grandchild. When he or she turns 18, it becomes his or her property. As you make gift-related contributions, the money can grow over time. The gift of compound interest is a valuable one, since it means that your grandchild will end up with more than the face value of your gift. And, as with the 529 plan, the Coverdell account can help your child pay for college, reducing the need for loans.
Custodial Investment Account
If you want to be more actively involved with your child’s investment education, you can open a custodial investment account. It’s important to note that you lose control of the account when your grandchild comes of age, but it can be a good learning experience for him or her. You can provide some money for the account, and then encourage him or her to learn about different investments, and make choices together for the money. This can be a great way to teach your grandchild about index funds, or looking for solid companies. It can be a fun way to educate your grandchild, providing a great gift of knowledge as well as money. This type of gift can be especially appropriate for teenagers who have the ability to start understanding investments.
With the right financial gifts, your grandchildren can get a head start in life, making money rather than getting caught up in consumerism.
By Miranda Marquit, Staff Writer