What to give your children or grandchildren for the holiday season is an annual dilemma. Once you get past the popular holiday toys (think Frozen anything!), or clothes (not very exciting), there are some real opportunities to make your gift a rewarding money experience for the young people in your life.
So, here's my annual holiday gift list for kids, with some terrific old favorites and some new, high tech apps that are guaranteed to give both enjoyment and money lessons.
The Money-Savvy Piggy Bank ( www.msgen.com, $18.99) This four-chambered, see -through plastic piggy bank is designed to teach even very young children that they should set aside money for different reasons: saving, spending, donating, and investing. They are empowered to make decisions about where their allowance or gift money should go. The bank also comes in a chambered soccer ball or football. And for an additional $2.95 there's a family activity and coloring book to help teach the lessons
OMG Official Money Guide for Teens (www.msgen.com, $12.95) Written by Susan and Michael Beacham, founders of the MoneySavvy Generation website, this guide for young teens is easy to read but not patronizing. It focuses on money choices ranging from saving and spending, to how to pay for the things you buy. Teens will relate to the "awkward money moments" described in the book. it's a great way to start a talk with children as young as 11 years, setting them on the path to good money habits.
iAllowance App (the App Store, Free for first child, $0.99 upgrade for each additional child) Okay, let's acknowledge that young children use Mom's iPhone, Dad's iPad - or even have their own online technology. There are several popular apps to help children understand money - and help parents follow through on allowance and performance promises. iAllowance seems to get the most user votes because it is so flexible.
The "rewards" can be in the form of money in a "savings account" or "stars" for performance on completing tasks in a certain time frame. (Or "punishment" can result in losing stars!) You can set up an allowance to pay out automatically on a weekly or monthly basis, in either stars or dollars. Then you can add chores from a pre-set list (take out trash, fold laundry, make bed, clean your room, etc) or add your own! Keep track of chores done, and stars earned. A handy tutorial explains everything.
Zillionz ATM Savings Bank Zillionz - Savings Goal ATM Bank (Amazon.com, $39.95) These days kids don't think money grows on trees; they think it spits out of ATMs! So this might be the perfect gift to show that money goes IN to an ATM, as well as coming out. It accepts coins and paper money, and allows kids to make deposits as well as withdrawals, with the account balance showing on an LED screen. It's battery operated, and although recommended for children 5+, I think it would be better for age 7+.
Buy a Share of Stock on Sharebuilder If you're wondering about how to give shares of stock to get a child started early on an investing career, Sharebuilder (now a unit of CapitalOne) is the place to open an account. There is no minimum dollar amount to invest, and you can open a custodial account in the child's name. (Warning: money in custodial accounts weighs heavily against the family applying for financial aid for college.) But in the meantime, your child or grandchild can track his or her "portfolio" of as little as one share of most listed companies. (If McDonalds or Disney or Nike or Apple are favorite products, let them become a shareholder.) Fee for each transaction is just $6.95 per transaction, no matter how much, or how little, money is involved. And you get a $50 bonus when you open an account.
529 College Savings Account (www.savingforcollege.com) OK, grandparents, this will definitely NOT take the place of a cool app or a great toy this holiday season, but it will pay off in tax-free growth of your investment when the money is used for college. Grandparents can give a one-time gift of up to 5 times the annual gift limit of $14,000 (or a total of $70,000 to each child) - or a far smaller amount (typically a $500 minimum) to open a 529 College Savings Account, and contribute additional money for holidays and birthdays. Each state may allow a deduction on your tax return, up to a limit, for making the gift.
The 529 money grows tax-free if it is used for college expenses, at any school and in any state. And money can be transferred between children in the same family. Don't worry about how to invest; use the age-based plan and it will gradually switch to a more conservative portfolio as college approaches. And you don't need to use your own state's plan. Compare state plan offerings at www.savingforcollege.com based on annual costs of the plan and performance of the investments.
If you make wise choices in your holiday gifts for children or grandchildren, the gift may pay you back in the long run by teaching a lifetime of good money habits. That's the Savage Truth!