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As the holiday shopping season heads into high gear with Cyber Monday, you may want to look for alternatives to expensive toys or physical gifts. Consider another kind of present - a financial one. There are plenty of ways to give generously besides a wad of cash or a check inside a holiday card.
Start with a conversation, says Angela Furubotten-LaRosee, lead financial planner at Avea Financial Planning in Richland, Washington. Topics can include managing credit cards and savings, early career workplace benefits and managing the financial picture for aging parents or retirement. Bring up what you've learned from mistakes, too, she suggests.
"Families just don't talk enough about the good, the bad, and the truth surrounding their own financial situation," Furubotten-LaRosee said.
Cyber Monday personal finance gifts to buy now
Once you've talked with your family, you may have a better idea of what makes a good gift. Here are a few suggestions from experts:
Financial planning
You can help a loved one straighten out their finances, plan for the future and even get their estate in order by hiring an online financial adviser or planner.
"For anyone that doesn't already work with a CFP, gifting time with one is ideal, especially this time of year and can help to begin the New Year on stronger financial footing," said Melissa Sotudeh, a CFP and director of advisory services at Halpern Financial, a Washington D.C.-area firm.
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Estate planning
Estate planning, ncluding wills, health directive preparation and life insurance can be a particularly useful gift.
"It is something that most people put off and won't buy for themselves," said Mark Struthers, a certified financial planner with Minneapolis-based Sona Wealth Advisors.
Life insurance
Life insurance payments can also make a good gift as part of financial planning at any age, including estate planning, experts note. Helping someone make payments to keep this protection may be appreciated.
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Contribution towards a Roth IRA
In 2022, the annual contribution limit is $6,000 a year or $7,000 a year for those 50 or older, so be conscious of how much you're contributing versus a person's limit and previous contributions.
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Pet insurance
Pet insurance can be most welcome for the right recipient.
"I have had folks give a certificate to show they bought it and the people that received it loved it," Struthers says.
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Gold
Gold is traditionally thought to be a hedge against inflation as its value can rise in an uneven economy. For younger people looking to diversify their portfolio, it may make sense to pursue gold as an asset.
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Financial gifts for kids
There are several types of accounts that you can open for children that will help them live a financially secure life well into adulthood.
Custodial Roth IRA (or children's Roth IRA)
A custodial Roth IRA follows Roth IRA rules with some important caveats. A custodian manages after-tax contributions - usually, a parent, guardian or grandparent - until the child reaches legal adulthood (age 18 to 21 depending on the state).
"In order for the child (or anyone) to be able to make a contribution to a Traditional IRA and/or a Roth IRA, the child must have their own earned income for the contribution year," said Alicia Reiss, a certified financial planner (CFP) and owner of the virtual firm The Business of your Life.
Children don't need to use their own money to make the contribution but contributions can't exceed more than the child earned that year, Reiss adds.
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529 plan for college
A 529 account works like an investment account for educational purposes only. Specifics vary by state and contributions to 529 plans can be advantageous when it comes to taxes. Funds may only be withdrawn for specific educational purposes or you will face a penalty.
A 529 plan "can be better than the [children's] Roth since the owner, the parent, or the adult, does not give up control," said Struthers. "And because it is education specific, it tells the child that you believe that they CAN get the grades and CAN get into college."
Uniform Transfer/Gift to Minors Act accounts (UTMA/UGMA)
These are investment accounts designated for children that transfer to them at the age of majority – 18 in most states but up to 21 in others.
Remember to check tax limits and rules
It's important to be aware of gift and estate tax limits, notes Brett Spencer, a CFP and founder of Boston-based Impact Financial. For 2022, gifts over $16,000 (the annual exclusion amount set by the IRS) can be taxable.
It also helps to be aware of financial aid qualification limits, especially if a young adult is getting ready to fill out a Federal Application for Financial Student Aid or FAFSA, experts note.
"If a gift is intended for a grandchild's education, grandparents may want to own the account with the child listed as the beneficiary," Spencer notes. That's because the assets of both parents and child may be counted when calculating college financial aid eligibility. Grandparents aren't typically considered in the equation, he notes.
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