5 ways to give kids money during the holidays – msnNOW
We all have different gifting styles. Some of us are DIYers, some are risk-takers and many of us just ask our giftees for their wish lists. You might be someone who always gives money during the holidays or, more likely, someone who likes to receive money. Cash is convenient and easy for the gift-giver, and it lets the recipient save or spend it on what they want.
What about gifts for children? While it’s hard to figure out the coolest toys and tech for tots, you might also hesitate to hand over cash to children.
In fact, giving kids money for the holidays can be a great way to teach them about personal finances. There are a couple of different approaches to helping teach the children in your life about managing money.
1. Giving kids physical money
Remember what it felt like to receive money as a child? A little bit of cash can go a long way in making a young giftee excited. Plus, familiarizing children with money can help them learn how to spend and save responsibly. Even if the child might want to spend it all in one place, that could lead to valuable lessons early on. You can also take the opportunity to help them open a custodial savings account to teach them about saving money. Parents.com suggests that between the ages of 6 and 8 is the perfect time to introduce kids to bank accounts and saving.
2. Giving money toward college tuition (529 contribution)
A 529 plan may not spark the same excitement as unboxing a PlayStation 5, but it does offer a tax-advantaged way to save and invest for qualifying education expenses, like paying for college tuition. While your giftee may not fully appreciate it right now, it’ll be plenty important down the road. Such a gift can be used to teach a kid about the importance of self-investment via education.
Contributions toward a 529 plan can be invested in the market to later be withdrawn without capital gains taxes , much like a Roth IRA. There are several ways to approach making a 529 gift contribution for a minor. For example, you can contribute to an existing account using the gifting platform that most 529 accounts offer.
You can also open a new custodial 529 account on behalf of a child, even if you’re not their parent or legal guardian. You’ll need to have the child’s Social Security number (or Individual Tax Identification …….
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