#64 – This Christmas, surprise your grandkids with a gift like never before.
Give them a financial gift!
The earlier your grandkids start learning about money, the better. This can help them make more prudent financial decisions in the future.
Are you ready to give them a gift that piques their curiosity about financial planning?
In this episode, Jeremy Keil has 5 financial gift ideas (other than cash) that you can give to your kids or grandkids. Whether it’s a 5-year-old child or a young adult, these can make a great Christmas gift for children of all ages!
- Common misconceptions about gifting limits and why they aren’t true
- The impact of financial gifts on your grandkids’ long-term money management
- Tax implications of different financial gifts
- Educational (but fun!) resources to teach children about finances
- And more
5 Best Financial Gifts for Grandkids
1) College Savings Accounts
Are you aware of 529 plans? They are a type of college savings account where your investment can grow tax-free.
If you want to assist your grandkids in their higher education studies, a 529 plan can be the perfect gift for them!
Although these plans are offered across the entire country, there might be some variations in the tax rules for different states.
For instance, in 2021, Wisconsin allows a tax deduction of $3,380 per kid. But in Illinois, you’re allowed a tax deduction of $10,000 per person (i.e., the giver; not per kid). So, don’t forget to confirm the rules for your state.
Note that the withdrawals from 529 plans can only be used for higher education of the beneficiary (the 2017 Tax Cuts and Jobs Act did extend that ability to K-12 schools, too, but with a $10,000/year maximum withdrawal).
By higher education, we don’t mean just the typical 4-year college. The money can also be used for other qualifying higher education expenses, such as trade schools, continuing education in certain fields, apprenticeship programs, etc.
2) Roth IRA
Now, this might not be the ideal gift for a five-year-old. But as your grandkids enter their teenage years, start earning money of their own, and receive tax forms (such as W-2s), they’re able to open a Roth IRA.
But let’s say that your grandkids earn only $1,000 – $2,000 and could not set aside enough funds to start a Roth IRA — not a problem!
As long as they start getting their wages, they’re eligible for Roth IRAs. So, you can give them the money it takes to open an account.
There are two primary benefits of doing so:
- Due to the time value of money, the earlier you invest, the better. The maximum Roth IRA contribution limit for people under age 50 is $6,000 per year, but also can’t be more than their reported taxable wages.
- It instills a great savings habit in your grandkids. Encourage them to add your own money on a monthly basis and they’ll learn a life-long habit to set aside money and invest in their future, even if the amount is as small as $50 per month.
Gold is nice, fun, and shiny. Your grandkids might love it!
From a tax-planning standpoint, gold exchange-traded funds might be better as the collectibles’ tax rates on actual gold coins are relatively higher.
However, wouldn’t it be cool to receive a gold (or silver) coin from grandma and grandpa? It could leave a much better impression when your grandkids are delighted to find shiny gold coins inside their Christmas presents!
It’s possible that your grandkids might not sell that gold coin later. In that case, it might end up becoming a good momento for them!
4) Life Insurance
A lot of people ask us, “Why would I want to give life insurance to my grandkids?”
If due to an unfortunate event, a grandchild dies, that would be a nightmare. But if you’re bombarded with huge funeral expenses at the same time, it just worsens the situation.
There could be other reasons to gift life insurance beyond just the death benefit. Here’s a quick story to show you how impactful life insurance could be at an early age:
A few years ago, I met a couple. They were newly married and had young kids.
When the father went to get life insurance for himself, his application got rejected by several insurance companies. It was because he had developed diabetes at an early age (at around 8 years old).
Luckily, his grandparents had taken out life insurance for him with a company when he was born. When we contacted that company, they were ready to increase his existing life insurance! This was such a huge relief for his family — all thanks to his grandparents.
If this is a concern for you, make sure to add ‘guaranteed insurability options’ on the life insurance so they could get life insurance down the road when they otherwise might not be able to.
5) Financial Education
This is probably the best one out of this list.
You don’t need to give a lot of money to your grandkids. The gift of financial education itself would be amazing!
If you have done well financially and learned how to manage your own finances effectively, it’s good to pass this knowledge on to your grandkids.
They are some of the best financial educators, with books and other resources tailored specifically for kids and young adults.
Remember, it’s never too soon to start learning about your finances! The gift of financial literacy can help your grandkids get a headstart in their financial journey.
Make sure you check out the resources below to learn more about best financial gifts for your grandkids.
If you have any questions, feel free to contact us and we’ll be more than happy to help you!
- Retirement: Best financial gifts for grandkids
- Dave Ramsey
- Art Rainer
- “The Great Lemonade Stand Standoff” by Art Rainer
- 3 Things You Should Know Before Choosing A Financial Advisor
- 6 Questions Retirees Aren’t Asking But Should Be
- Subscribe to Retirement Revealed on Google Podcasts
- Subscribe to Retirement Revealed on Apple Podcasts
Connect With Jeremy Keil:
- (262) 333-8353
- Keil Financial Partners
- LinkedIn: Jeremy Keil
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- LinkedIn: Keil Financial Partners
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