Great Financial Gift Ideas For Children

by Michael P

No matter how old you are, getting a gift is always an enjoyable time. That is of course if it’s a good gift.

When buying for kids, you usually go down one of two routes. The first route is buying toys, which will make you the favorite uncle, brother, father or pretty much favorite anything. The second route is buying clothes, which makes you the most hated person this kid has ever seen. From my own personal experience, there is no greater reason to cry in your entire life, then to open a sweater on your ninth birthday. Family and friends that do that should be quarantined together on an island, or something comparable.

Financial Gifts for Children

financial gifts for childrenBut there’s a third option that a lot of people don’t explore. What if on Johnny’s 10th birthday, you decided to give him something that begins to teach him the importance of finances in his life? Granted, the younger the child, the less likely he or she will understand what you are trying to do here, but there are an ample amount of gift giving ideas that fall into the financial category, and they all have good value.

CASH – The first and most obvious gift that you can give would be cold hard cash. When I had cash as a kid, the world looked different. Possibilities were endless and I was pretty sure I could have purchased any country I wanted for only $20. There’s no heartache and certainly no tummy-ache big enough to bring my mood down from this recent inheritance. The problem with giving cash as a gift is that it really doesn’t do anything to teach children about being responsible with their money. The cash wasn’t really earned so the value it holds isn’t much. While you are certain to be hugged and praised for quite sometime, you can do better.

SAVINGS BONDS – A step up from cash, savings bonds can be absolute torture to a young kid. Having something so close to cash, yet being years away from being able to spend it is a great way to teach patience. (And a great way to be hated as well!) Currently you have two main choices for bonds, the EE and I. Double E-Bonds mature to the value printed on the certificate, whereas the I-Bonds mature to a value greater than that on the certificate. I mistakenly assumed that I was given twice as much money because I always received EE-Bonds. Savings bonds are a good way to teach kids patience, which is a valuable financial lesson.

COINS – Having a family of numismatists, coins were a large part of growing up for me. Each year my family would travel to a coin show or two and teach me about collecting. I learned how to spot forgeries, how to grade a coin’s condition and a lot about American history in the process. To this day, my brother and mother are still avid collectors of domestic gold pieces and have even added paper money to their pursuit. Coins, and hobbies in general, are an excellent way to drive kids to work for what they want. Giving the gift of a rare coin could begin a quest for vast coin collection like no one has ever seen. Just make sure you explain that your gift is worth more than it’s face value, as giving someone a penny for their birthday could be a big letdown.

STOCK – Getting a little more complicated now, stocks are a risky pick for a kid’s gift. There’s no guarantee that the stock will be around long enough for the child to take advantage of the monetary gain, so giving a stock needs to be more about handing over a certificate (Although stock certificates are pretty cool if you ask me). Sit down and explain exactly what a stock is, how it works and how if they want to, they can add to the value of the stock over time. Try and get them to follow the company they are now invested in and hopefully you will find them, one day, watching CNN on their own time.

IRA – Continuing to venture farther and farther away from the conventional, opening up an IRA that friends and family can contribute to is an off-the-wall idea that might just work. There are a few rules to note if you choose this option as (1) the kid must be working and earning a salary because the amount you can contribute is either $5,000 or his entire salary (whichever is smaller) and (2) it can’t be touched until the age of 59.5. It’s a somewhat strange gift to give a teenager but if your looking to teach true patience, making someone wait over 40 years to see your gift is probably the best way to do it!

COLLEGE SAVINGS ACCOUNT – A Coverdell Account is, in essence, a college fund for students to use for anything relating to the expenses of school. Anyone can contribute to a students account and as long as the child is under 17 years of age, they can be signed up for a Coverdell Account. The immediate benefit is that the withdrawals are tax free, again as long as they are used for educational purposes. The contributions however, are not tax deductible. In the instance that the student does not pursue a college education, the funds are assumed as income and are subject to regular income taxes. A 529 College Savings Plan is another way you can help a child save for college. You can compare the two accounts here: Coverdell ESAs compared to 529 Savings Plans.

This guest post comes from Michael, a contributing editor of the Dough Roller, a personal finance and investing blog, and Credit Card Offers IQ, a credit card review site.

Published or updated December 12, 2012.
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{ 9 comments… read them below or add one }

1 Kyle C.

My oldest is only three so he still doesn’t really get the connection when it comes to money. Luckily the one thing we have been able to teach him is that when he gets money it needs to go into his piggy bank. Right now he has well over $200 I think between his ATM and piggy banks.


2 Sandy L

When people gave me cash, my parents took it and spent it on necessities. I always hated getting cash because it was really a gift to my parents and not to me.


3 Kristen

When I was a kid, my grandmother told me she opened up a checking account in both of our names. I felt kind of important that I was going to have a checking account, because only grownups had that. But I didn’t really appreciate it until I went off to college and grandma handed me a checkbook to an account that actually had money in it. That’s how I paid for my books.

The clothing comment was funny. I’m always trying to be the best gift giver for my 5-year-old nephew. This year he wanted a “Ben 10” jacket. I had no idea what it was, and it turned out they weren’t for sale in stores. Ebay, however, had the jackets. I ended up paying more money for that jacket than any piece of clothing I’ve bought for myself in the past year. But, my nephew was so excited. He slept in his jacket that night.


4 Craig

As a kid, any sort of cash or gift card worked great with me.


5 ken

I like the progression you do in the post. With any gift for kid you have to make sure it’s age appropriate. Good post.


6 DB

Regarding the Roth IRA – while it is true that you are not permitted to withdraw any of your earnings prior to age 59.5 (unless you use them for a first-time home purchase), you are certainly entitled to withdraw your contributions *at any time.* This may present quite a temptation to a young adult just getting out in the world!


7 Ryan

DB, I believe contributions must be in the Roth IRA for 5 years before they can be withdrawn without penalty; but any gains must be left in the Roth IRA or they will be subjected to early withdrawal penalties.


8 Money Reasons

I’m pretty sure you can withdrawal the contributions at any time. The 5 year hold period doesn’t apply to contributions (but it does to conversions and earnings).

Schwab’s sites does a good job of summarizing the rules in a short read:
Schwab Roth IRA summary.


9 Money Reasons

Hehe, I remember getting those such sweaters from my grandmother. :p

I think it’s a female thing to buy cloths for boys at Xmas, my wife was going to buy my son a lot of cloths for Xmas too. If I didn’t intervene in her buying plans, who knows… maybe my son would be wearing a pink bunny costume to bed like Ralphie in “The Christmas Story”… 🙂


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