Holiday Gifts That Keep on Giving

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By Steve Rosen From Tribune Content Agency

Toys, of course, are a shopping must. But consider some gifts for the kids that will keep on giving long after the blocks, action figures, and game systems get relegated to the back of a closet or attic.

Savings bonds, contributions to college savings accounts, and helping to fund a teen’s future retirement savings account may not generate much excitement from a child or grandchild. But these financial gifts will be much appreciated many years from now.

Here are three gifting ideas bound to pay dividends down the road. With all three, there are tax benefits and consequences to be considered.

Savings Bonds

Inflation-adjusted Series I bonds are one of the hottest investments going, with bonds issued from November through April 2023 paying a composite rate of 6.89 percent. Bonds can be purchased from the Treasury in denominations of $50, $100, $200, $500, and $1,000.

You can give savings bonds as gifts for all different types of occasions. Many of you remember being able to buy a paper savings bond through a bank. Those days are over.

Now, unless you receive a tax refund, you must buy the bonds electronically through TreasuryDirect.gov. You’ll need a Treasury Direct account and the recipient must also have an account. If you have a refund, you can buy a paper savings bond.

That said, the Treasury website features different cards you can print out and enclose in a holiday card to give to the recipient.

Keep in mind that a parent or other adult custodian will need to create a custodial account on behalf of a child who’s younger than 18. After the child turns 18, they can create their own Treasury Direct account, and the custodian can transfer the bonds to that account.

The maximum amount you can buy is $10,000 per person. For more details, go to the Treasury Direct website.

529 College Savings Plan

Contribute to a child or grandchild’s existing 529 college savings plan, or create a new one. Contributions to the account are tax deferred and withdrawals are tax free as long as the money goes toward paying qualified educational expenses, including college tuition, room and board, books and computers. The plans can also be used to pay for school tuition for grades kindergarten through high school.

If you’re considering a gift, check out online gifting platforms such as Ugift.com, a free service that makes it easy to contribute to a 529 plan over the holidays or any time you want.

Nearly all states offer 529s. At www.savingforcollege.com, you can compare 529s, investment options, and performance.

Also, the nonprofit College Savings Foundation recently released its annual list of state-by-state 529 gifting programs. There are 46 different programs with several showing significant growth over the last year.

Roth IRA

If your child earns money from work, you can open a custodial Roth IRA and contribute to it on his or her behalf. There are no age limits on opening a Roth; however contributions can’t exceed the child’s income for the year. For example, if the child earned $1,500 for 2022, contributions to the retirement account can’t exceed $1,500.

A final thought, if you are giving a child toys, I suggest donating an old toy for every new one that’s sitting under the tree. That will keep down the clutter, and teach your youngster a lesson on how to help those in need.

(Questions, comments, column ideas? Send an email to [email protected].)

©2022 Steve Rosen. Distributed by Tribune Content Agency, LLC.

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