Give the gift of financial security for your loved ones this holiday season
Instead of the latest toy or gadget, some people are trying to give their loved ones more financial security this holiday season.
While it’s long been possible to hand out cash, buy stock or contribute to college savings plans, financial institutions are making it easier to bestow a gift with lasting value.
“It’s easy to do and you don’t have to worry about a toy breaking, you don’t have to worry about batteries and you don’t have to worry about the latest trend,” said Young Boozer, chairman of the College Savings Plans Network.
Financial gifts can be tricky, though – givers need to be aware of the tax and social implications.
Ann Coulsen, an assistant professor at Kansas State’s Institute of Personal Financial Planning, called such gifts a “wonderful and practical idea.” But a recipient who wants something “now” might not appreciate it, she said. It may take some explanation of how stocks or savings plans work. In fact, the easiest way to gift financial security while educating them about finances at the same time – is to set them up with their first consultation with a Certified Financial Planner.
Financial security in any facet is a much more meaningful gift than the newest gadget or trend.
Here’s a look at the ins and outs of some popular financial gifts:
1. Financial Planner
Consider giving the gift of financial planning – the opportunity to build financial awareness with a trained expert.
Financial planning is an investment, and it costs money, but financial peace of mind is a unique and extraordinary gift well worth the expense. Here is a chance to get a handle on current problems with spending, debt reduction, and investing; and a long-term opportunity to diffuse the fear of financial issues by learning everything possible about them.
It doesn’t matter if the recipient is a single working individual or a family with kids still at home – the right financial planner can be a long-term partner in re-educating everyone in a household about money and the right ways to handle it. Here is an all-occasion present that can set them on a good course for life.
If you’d like to arrange the gift of financial planning for someone special, call Vermillion Financial Advisors for details and suggestions.
2. College Savings
“Grandparents, for the love of Santa, ask your kids if they have a 529 account set up for your grandchildren,” said Kristin Sullivan, a financial planner in Denver. “If yes, offer to put some money into that and put something small under the tree for the kiddos. If no, offer to set one up with some small seed money.”
529 college savings plans grow tax-free, and withdrawals for educational expenses are also untaxed. The giver may get a tax break as well. Thirty-four states and the District of Columbia offer either a state income tax deduction or tax credits for those contributions. And nearly all plans allow contributions online or by check, said Boozer.
Craig Larson, of Apple Valley, Minnesota, welcomed his first grandchild a few months ago and is planning to open a college savings account for her this Christmas.
“I’ve already spoiled this poor little girl to death,” he said. “This is something tangible that is not going to end up under the bed or lost at the beach, and she’ll be able to see it growing.”
To give you either need to establish a savings plan or contribute to an existing one, which requires knowing a few personal details. There are also third-party options that require less legwork.
3. Student Loan Payments
We all know somebody with student loan debt, and the burden it has on so many graduates trying to get a stable living after college. A gift that helps reduce that burden will surely
4. Stock
The giver may avoid the capital gain consequences of cashing in the shares themselves. But the tax implications for the recipient are tricky depending on their age, the value of the stock and more – so it may be worth consulting a professional.
People without brokerage accounts or those who want to start small can even buy stock at the checkout line.
The bulk of Stockpile’s customers are people giving gifts to a younger generation – about half of its account holders are under 30. But many companies also buy stock as gifts for employees.
“It’s such a society where you are consuming and buying, here is something that is going to last, potentially multiple generations,” Schatt said.
5. Cash
Giving a small amount of money each year is a common estate planning tool, but gifts from one person to another are capped by the IRS at $14,000 a year. Anything above that needs to be reported by the giver on their taxes and is subject to gift and estate taxes.
You may want to consider taking that cash and putting it in IRA, mutual fund or other longer-term investment.
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