Great Financial Gift Ideas For Children

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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.…

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

But 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.

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 – as Cash or Collectibles

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.

Stocks & Other Equities

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.

A cool way to do this is through Stockpile. Stockpile is unique in that it allows users to 1) buy stocks for themselves, and, 2) purchase stock “gift-cards” for others.

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.

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, provided the child has earned income.

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 $5,500 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 you’re looking to teach true patience, making someone wait over 40 years to see your gift is probably the best way to do it!

Related post: Estate Planning Basics

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.

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About Michael P

Michael is a blogger and credit card expert. He specializes in reviewing credit cards and sniffing out the best deals in the credit card market, including sign up bonuses, credit card rewards, and more. He enjoys a classic pitcher's duel and all things pop-culture.

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  1. HisHersMoney says

    Are you able to open a Roth IRA for a child? Not sure, but if so the compound interest over the next seventy years or so plus tax free withdrawals would be great!

    • Ryan says

      His and Hers, Our child would need to have earned income to open a Roth IRA for her. She doesn’t have a job right now, and few children do (though I know a couple parents who have gotten modeling jobs for their children and they invested that in tax deferred investments and college savings accounts). As for now, we are limited to taxable savings accounts and college savings accounts. But I think it will be enough to get her started on the right path. 🙂

      • Ryan says

        My Journey, the college savings plan is pretty much our plan for now. I also plan on putting a little away for her savings so she can have a liquid account as well. I’m sure there will be a time when she needs some money.

  2. My Journey says

    HisHersMoney,

    To set up a Roth you need earned income. I think it is more important that they set up a 529 asap and push all gifts that come in through the parent’s bank account and then into the 529 (you get a tax deduction in most states) and the temptation to use the kid’s college money is taken away.

  3. Lynn says

    We decided to do the same with our twins but we didn’t start until they were 6 months old (they are 2 1/2 now). We opened ING accounts, coverdells and 529’s for both of them. We are slow going with the 529/coverdells and are only putting $50 into each of them each month for both of them. Once we completely tackle our debt we will ramp these up but for now its just slow and steady. Our goal for the ING accounts is to put in $1K a year for each of them so that they will have $18K by the time they are 18. I am the primary account holder (and am paying the taxes) so I will decide when they get the money. LOL! We haven’t decided whether or not we are going to tell them about the money. If we decide to tell them then we don’t know when we will do it because they will just think they can spend it on anything. Once they are old enough to save money for themselves we are going to open up another account that they will be able to access when they want.

    Good luck with your saving. 🙂

    • Ryan says

      Lynn, Sounds like you have a good plan going! and you are doing the right thing by tackling your debt before putting more money away for them to use later. They will always have the chance to earn money later, or borrow for school. It’s important to slay your debt first.

  4. Melanie says

    That is great work that you are starting so early. We were a little later getting started in the game, but we have picked up the pace now. We have savings accounts for both children, as well as RESP’s (The canadian version of the 529). As well, my son is turning five next month and will begin getting an allowance. This will begin the trend of discussing money and savings openly and I hope he will make smart decision with his money as he gets older.

    Enjoy your newborn, they are fantastic!

  5. Miss M says

    This is wonderful, I wish all parents were as concerned about their children’s financial future. I’m still a few years from having any of my own but I already read all I can about starting kids off on the right financial footing. My parents taught me nothing about money, I won’t make the same mistake. Hope you’re having fun with her!

    • Ryan says

      Miss M, We are having fun with her. She is a little blessing. 🙂

      My parents taught me a little about money, but not too much. I just got interested in it as I was growing up and took it upon myself to learn more about it. This blog is a result. 😉

  6. Matt Jabs says

    Man I wish my parents would have had this passion for me when I was being reared! She stands to be blessed with financial wisdom from you which should give her a HUGE leg up in this world.

    I say bravo!

    “The goal is to start her off right, not do everything for her.” – I believe this is the toughest part of the equation… maintaining this balance – but since your goals are to teach her how to manage it & not simply to give it to her – you should succeed nicely.

    • Ryan says

      I hope so, Matt. My parents opened a saving account for me and gave me an allowance when I was growing up, which was a good start. But they don’t have quite the same passion as I do regarding money. Hopefully I can teach my daughter a little more than I learned as a child. 🙂

  7. Blake Erickson says

    Wow, ever since my daughter was born 3 months ago I have off and on thought about opening a savings account for her. Thanks for the extra reminder! While I barely even have enough for me to put away, I think that no matter how small the contribution now it will definitely pay off to at least be in the habit of contributing to her college fund so that when I do make more money I won’t waste any time.

  8. Kyle C. says

    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.

  9. Sandy L says

    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.

  10. Kristen says

    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.

  11. ken says

    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.

  12. Money Reasons says

    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”… 🙂

  13. Miss V says

    I have three boys that I have taken over as my grandsons. My question is these guys are 12, 13, & 14. My credit union will give 5% to open an account up to $500. Rather than giving cash for them to spend when they want, I would prefer just to contribute for each occasion that I give them money for. Is it fair to take $1500 and put the max in each account of $500 and just start adding $100 for each occasion on each. The only catch is that I do not want them to be able to access them until they are at least 30. Would this help them out at that time? They have college funds, and also could the other grandparents contribute to this fund? None on us will have access other than to deposit and keep tabs on its growth. Anything better out there?

    • Ryan Guina says

      Miss V, if you want to set a legal limit on when the children can access the funds then you should most likely look into a trust or some other legal document. Setting up a trust is outside the scope of this website. You would want to speak with a lawyer that specializes in trusts and estate planning. Best wishes!

  14. Ryan says

    Melanie, Glad to hear you have gotten started already as well. I know a lot of people who don’t put any thought into it and as a result, their children expect their parents to be a source of money whenever they want it. hopefully I will be able to teach our daughter how money works, and how to work a budget, etc.

    We are enjoying her. She is a little blessing. 🙂

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