With the holiday season approaching, thoughts turn to presents for the family.  Toys?  They already have too many.  Sweaters?  Practical, but maybe a little too practical.  Here are a few financial gifts that might fit the bill…

• Contribute to a Section 529 education plan on behalf of your child or grandchild. This can be any amount (though often institutions will have a minimum of, say $200, to open an account) and you can contribute small amounts to it every month, for birthdays, holidays, or other special occasions.  You can share the account information with other family members who could also contribute to the fund, if they so desired.  The funds can be invested and will grow tax-free.  If the account is used for education down the road, all the money will come out free of tax.
• Do you have a child or grandchild that is working? As an alternative to spending money on the newest video game, consider opening a Roth IRA for them.  This will help instill a “savings” mentality in them and begin that long road of accumulating funds for retirement.  The funds invested inside the Roth will grow tax-free and can be withdrawn free of tax in retirement.
• Here’s a unique gift. Consider sparking an interest in the stock market by opening a brokerage account with someone such as stockpile.com.  Stockpile allows you to contribute some money to an account and then either you or your child/grandchild can use it to buy shares or fractional shares of stocks, mutual funds, etc.  One share of AAPL perhaps?  Or one-tenth a share of AMZN?  10 shares of VOO (a Vanguard S&P 500 index fund)?  Buying small amounts of stock over the course of many years can add up to a significant nest egg.

These gifts likely won’t be as well-received as the latest electronic gadgets would be, but they will definitely be appreciated years down the road as they grow into something more substantial.

There are, of course, limitations on the dollar amount of gifts that can be given to a person in any one year, as well as limitations on how much can be contributed to a Roth IRA.  If you have any questions on any of this, please contact your Smith Leonard Financial Planning or Tax Specialist.