Gifts to begin new year can impart wisdom
For 11-year-old Max Schwartz, the holiday gift he was most curious about was a little box of dollar bills.
Last year, as an incentive to get Max thinking about saving, spending and donating, his banker dad offered to double part of his $24 monthly allowance. In return for not touching those savings all year, his father dangled another bonus. He'd double it again at year's end.
Twelve months later, on Christmas morning, Max opened a check-sized box. Inside was $200 in crisp dollar bills. His father, Peter Schwartz, admits he's "way too nice" and added a bigger bonus.
Of that total, Max got to spend 70 percent, had to save 20 percent and got to choose where to donate 10 percent. When the California fifth-grader showed up a week later at the Society for the Prevention of Cruelty to Animals his chosen charity to hand over his $20 donation, the staff cheered, rang a bell and hugged him.
"In one year, he learned the power of saving . and the power of giving away," Schwartz said of his son.
Max's dollar box is just one example of a money-mindful gift that can be given during the holidays or anytime. In an uneasy economy, many families like the idea of giving something that gets their kids thinking about smart money managing.
With that in mind, here are some money-minded holiday gift ideas from parents, grandparents and money professionals:
Ellen Powell, nonprofit consultant • Several years ago, Powell had to start taking $2,000 a year from an IRA that her savings-minded dad left her in his will. "It's money I never expected to have, and I thought: 'What would my dad have wanted me to do with this money?' "
The answer was to open an Roth IRA accounts for her kids, then ages 19 and 22. Every year since, she adds equal amounts to those IRAs.
Creating retirement savings for her dad's beloved grandkids is "a way of honoring him," Powell said. "Someday that money will be worth something to them."
Other readers had the same idea. And Roth IRAs were the preferred choice because taxes are paid now, at current rates, instead of at future, presumably higher, tax rates.
Susan Lyon, finance analyst, NerdWallet.com • On the receiving end, Lyon said the "best money-minded gift I ever received" was a check from an aunt and uncle to open her first Roth IRA. Just as important: They walked her through the process, "making sure I understood what was happening every step of the way."
At 19, Lyon thought the holiday gift was a little odd. But today, at 26, the Princeton graduate calls it "the gift that keeps on giving year after year." Not only did it lessen "the intimidation factor" of investing, but it gave her a 5- to 15-year jump on her retirement savings.
Kay Brooks, estate planning attorney • For parents who've loaned their children money for a home or car and where the funds are actually being repaid "one thoughtful idea is to forgive some or all of the loan as a year-end gift," said Brooks. "It can be very gratifying to help an adult child reduce their debt."
Other ideas are to help a young adult pay down a student loan balance. Or help a newly divorced child with financial needs due to his/her changed circumstances.
Marcia Brixey, author of "The Money Therapist" • Buy a few shares of stock in companies your kids like, whether it's fast food like McDonald's, toy stores like Disney or beverage companies like Coca-Cola.
"Buying stock is a great way to educate children on how the stock market works. It also teaches children they are 'owners' of the company," said Brixey, who suggests buying additional shares on birthdays, etc.
Also for kids, think about a piggy bank to get them in the savings habit. She especially likes the "Money Savvy Pig," a clear, plastic bank whose porky body is divided into four compartments: "Save," "Spend," "Donate" and "Invest." It's $17 at http:/// http://www.msgen.com.
Gregory Burke, CPA • He recommends buying U.S. savings bonds EE or I series in a child's name. (Note: As of January 2012, they're no longer available in paper form but must be purchased online at http://www.treasurydirect.gov.)
Burke also recommends a new financial literacy book, "Save Wisely, Spend Happily," by CPA and financial author Sharon Lechter. Comprising "real stories" from 125 CPAs, it covers "everything from goal-setting to budgeting to raising financially savvy children," said Burke, who calls it ideal for a high school or college graduate or a young couple starting out.
Walt Romatowski, certified financial planner • His financial gift list includes U.S. savings bonds, CDs, shares of kid-friendly stocks (Disney, Apple, Best Buy, Facebook) or no-load index mutual funds.
He also suggests funding a 529 college savings plan and giving a young adult a subscription to Kiplinger's or Money magazines.
Eleanor Blayney, consumer advocate, CFP Board of Standards • Instead of clothes or gadgets, how about picking up the fee for a session with a personal financial planner? For a young adult or couple, it's a chance to sit down with a professional to tackle debt, budgeting and other financial topics, said Blayney of the Certified Financial Planner Board in Washington, D.C.
"Spending an hour or two with a financial planner can help them set some priorities . and get them off on the right financial footing," said Blayney, who estimated hourly rates at $150 to $250.
Jane Bryant Quinn, money columnist, AARP.com • She endorses traditional gifts, such as contributing to a 529 college savings plan, an IRA or Series I savings bonds.
For her kids and grandkids, once they turn 12, she slips checks or cash into envelopes. "At that point, they enjoy the fun of shopping for themselves," said Quinn.
Quinn says handing over a large amount of cash - such as for a future house down payment - is risky, since there's no guarantee it won't get spent on something frivolous. Instead, keep the funds in your own account and "tell the grandchild you're ready to help with X amount of dollars when the time comes."
Karyn Hodgens, financial educator • For young kids, "The Money Mammals," a DVD/ book that teaches kids about saving money; "Saving Money is Fun," a musical CD; and "Share & Save & Spend Smart" banking kit.
Books The Berenstain Bears' "Trouble with Money" and "Mad, Mad, Mad Toy Craze." Other favorites are "Alexander Who Used to Be Rich Last Sunday" by Judith Viorst or "The Monster Money Book" by Loreen Leedy.
Games Monopoly Junior and The Allowance Game.
For middle-schoolers "Not Your Parents' Money Book" by parent and author Jean Chatzky; The Game of Life board game.
For parents "Raising Money Smart Kids" by Kiplinger personal finance editor Janet Bodnar or "Raised for Richness," Hodgens' own book on teaching good money habits to kids ages 6 to 16.
For stocks Hodgens recommends kid-friendly funds such as the Monetta Young Investor Fund and using discount brokers such as ShareBuilder.com.
Suggestions from parents, grandparents and the pros
Buy DVDs/books such as "Money Mammals" or The Berenstain Bears' "Trouble with Money"
Open a Roth IRA account for kids
Forgive part of a loan to a loved one
Buy U.S. savings bonds
Pick up the fee for a session with a personal financial planner
Contribute to a 529 college savings plan