The Best Financial Gifts You Can Earn & Grow Forever
By: Mia Gradelski
Tags: Money, Wealth, Financial Advice, Rich, Covid 19

Stocks

The gift of stock can provide benefits, especially if the stock has appreciated in value since the giver can avoid paying taxes on those earnings.

Why this is a great gift for anyone:

-Can be given to a receipt whereby the recipient benefits from any gains in the stock’s price

-From investor retail apps such as Robinhood, SoFi, TD Ameritrade, E*Trade, Acorns, and Charles Schwab can all manage your stocks and make it easier than ever to learn how to invest but beware they are designed to become addicting!

-Improve your financial literacy, understand how the brands you love operate, and learn the value of money not the gambling side fo things

How to Gift:

Stock shares can be gifted from an existing investment portfolio through a brokerage firm and regardless of your age, children can be gifted as little as a single share to teach them about money, investing, saving, and buying. The sender gifting the stock will transfer ownership of all, or a portion of their stock holding for a particular company. The sender could establish an agreement with the brokerage to fit or transfer shares to a child every year on the child’s birthday, something my family set up until I started investing on my own last year.

What Is Needed:

Recipient:

Sender Information

Account name and address

Account number

Stock description including the number of shares and the company name

Giver:

Recipient Information

Account name

Social Security number

Account number

Depending on if the shares are transferred within the current brokerage firm, it will be easier than sending it to another financial institution where you must understand the procedures for completing a stock ownership transfer.

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529C Account

Although these aren’t the hottest power ranger toys kids are raging for, it will certainly be the most appreciated and worthwhile once they head off to college and learn how expensive the world really is.

These are classified as financial gifts that adults provide to their children that can help secure their futures. Everything from gifting shares of stock to an envelope full of cash are the basic financial gifts, but spicing it up with more earnings through compound interest and less taxes happens with funds.

529C contributions should be made by the parents as early as children are born to help them pay for college and use those funds through a tax-advantaged plan. These are state-sponsored investment plans. Yet, it is important to remember that a gift over $15k per year is subject to federal gift tax and for a ROTH IRA, the limit is $6k per year and continues to rise every year.

2 Types of 529C plans:

1) 529C Savings Plan:

Similar to 401Ks and IRAs, your contributions are invested in mutual funds or other investment products as a state-sponsored investment plan that coordinates with asset management companies for example Fidelity who handles the investment on your behalf according to state laws.

2) 529 Prepaid Tuition Plan:

These are prepaid tuition plans administered by states and higher education situations. Not as popular as a traditional 529C Savings Plan. With finance, you don’t always want to follow the unbeaten path.

Savings Bond

Savings bonds and treasury securities are types of debt that include Treasury bonds, notes, and bills that are inflation-protected securities (TIPS). The money you pay for a savings bond represents a loan to the US government and in exchange for the loan, the savings bond continues to earn interest for up to 30 years.

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ROTH IRA Contributions

If your child has earned income from a job, you can fund their annual contribution up to the allowable amount. This is a tax-advantaged account, similar to the 529C plan where you put in post-taxed money so when you take the money out when you are over 50, you don’t have to pay any tax on it, a huge advantage as every year taxes go up with the more money you have. As with everything in finance, the earlier the better. Compound interest is a miracle worker. By contributing $5k per year, you will be a multi-millionaire by retirement guaranteed. If you aren’t making income yet, make your child a custodial account so parents can provide gifts of up to that amount to start before the child makes money.

Trust- Massive Tax Benefits Against Regular Gifts

The purpose of a gift in trust is to avoid the tax on gifts that exceed the annual gift tax exclusion limit. This type of trust is commonly used to transfer wealth to the next generation.

A Crummey trust is a type of gift in trust that allows gifts to be given for a set period of time, establishing the gifts as a present interest and therefore eligible for the gift tax exclusion.

Gifts in a trust are made by parents who want to establish a trust fund for their children or grandchildren to inherit when you pass. A gift in trust is a viable method to avoid taxes on gifts that exceed the annual gift tax exclusion limit.

For the 2021 tax year, that amount is $15,000 or less made in a calendar year by an individual and $30,000 from a couple (the same as 2020).

Pro of a Gift in Trust

In addition to tax benefits, a gift in trust is one method of establishing a financial cushion for future generations. Transferring wealth from one generation to the next either through a will or trust is complicated going through a lawyer and thousands of paperwork in between. So a gift can provide benefits to get started early because the last thing you want to deal with is the court system dividing your assets once a family member passes. This will all be set up and the gift can be put into the irrevocable trust (ILIT).

Con

The younger you are, the more money can become dangerous. When I start starting earning money, I didn’t want to pay attention to saving and compound interest arithmetic. I just wanted to splurge it on Wendy’s and $20 popcorn at the movies for Toy Story 3. This can jeopardize your family’s assets fund’s ability to accumulate long-term wealth. Families can bypass this by setting restrictions, such as limiting the amount or frequency of withdrawals or ending future gifts to recipients who withdraw funds immediately. This can tremendously help impulse spenders.

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Cash

Cold hard cash is always a classic easy gift and not a bad one either. Honestly, I prefer cash over any gift because as picky as I am, you would cause me more trouble buying something I don’t need as I will most likely have to return it and go through that awkward hassle. As opposed to gift cards where you have to spend it at stories you might not like and at the same time, tend to spend more, cash can help you pay for a car, invest some in the market or have extra lunch money. Too much cash isn’t great because as discussed in Why Cash Is King it depreciates in value due to inflation and having too much is a waste but a moderate amount of cash as a gift doesn’t hurt.

Last But Not Least: Classic Financial Advice

There’s no point in earning or having been gifted money if you don’t know how to manage it. We always hear it’s not about how much you earn but rather how much you keep. It might be cheezy but usually, the most annoying sayings are the truest! Managing your money will lead to success, not just owning and accumulating it.

After you’ve understood that you must pay yourself first which means that you have to save more than you spend, your best next step may be searching the world wide web for financial advice. I know it’s a scary place and that’s why I’m here for you. If you prefer speaking with someone in person, obviously with a mask and glass cover, a financial advisor is a great place to start, but make sure they aren’t a broker there to just invest your money because then they will lure you in the wrong direction, only benefiting themselves to earn commissions on trades.

Especially when you are younger, reading up on our channel, YouTube, Investopedia, earning side summer money, and understanding the bills that your parents pay to keep a roof over your head will all help you tremendously in the long run. Investing in yourself and education is the best investment as it will always appreciate. Limit the history and up the finances because if there is only thing you need to know in your life to achieve your goals and live free is to stay out of debt and achieve your goals.

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Gifts are exciting. They mean you deserve something but most of the time, they don’t always come to good use or accumulate. Thanks to the world of finance and the options listed above, there should be no more excuses for you to say you don’t know what to get your bestie for Christmas! Everyone wants more money. That is all of our dreams but it shouldn’t be overtaking our lives either. You have the choice to make it fun and a great present. Make sure you understand how to put your money to good use before you trade or invest it in somewhere. That is the key to building and sustaining wealth.