Daily Press (Sunday)

Money-smart gifts for children

- Terry Savage Terry Savage is a registered investment adviser and the author of four bestsellin­g books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavag­e.com.

It’s tougher than ever to find appropriat­e holiday gifts for children or grandchild­ren this year.

But the coronaviru­s pandemic could create even more incentive to give money-smart gifts that will last a lot longer than clothes or toys.

The gift of a college education: Given the precarious financial position of many states, I’d be careful about contributi­ng to a prepaid tuition plan that promises semesters of fully paid college at an in-state school.

But there is no doubt that a 529 college savings account is the very best gift you can create for a child or grandchild. The money deposited in these accounts grows tax free for college in any state. And you can make additional contributi­ons for every birthday or holiday, helping the fund grow over the years. You (and your spouse) can each give up to $15,000 per year to each child’s plan with no ultimate gift or estate tax consequenc­es.

Because of a quirk in the original law, each state sets up its own 529 plan, but you can join any state plan. In fact, some states give residents a deduction on their state income taxes for 529 contributi­ons. Check out the best performing ones at SavingforC­ollege.com , which has direct links to websites where you can open a plan. Or just default to the Vanguard plan, which has a good overall track record and the lowest costs.

The gift of stock investing: Get a child started investing in the stock market as a hobby that will last a lifetime. You can buy individual stocks for as little as a $5 investment. But first be aware that any stock held in a child’s name will weigh far more heavily against the family if the child eventually applies for college financial aid. Still, there is something to be said for teaching a child how to invest, how to choose companies that he or she understand and likes — and how to understand risk and reward.

The best place to do this is at Stockpile.com, where you can open an account for a minor with $5. Designate purchase of a specific stock by sending a gift card, or just make a deposit into the account and let the child choose from over 1,000 stocks and ETFs. There is a delightful online tutorial to introduce the principles of investing. Of course, you can’t set limit prices on your purchase since orders are executed in a batch twice a day. And each trade costs 99 cents. But the purpose of this account is to teach investing for the long run.

Money Savvy piggy bank: My mother taught me to wash my hands after touching money because it was “dirty” from so many people handling it. That didn’t stop me from wanting to collect money. And the pandemic shouldn’t stop your little kids from saving money.

My all-time favorite money gift for children old enough to count and know their coins is the piggy bank created by Susan Beacham of Money Savvy Generation (moneysavvy.com). This translucen­t plastic piggy bank has sections labeled Save, Spend, Donate and Invest. The piggy bank costs $19.99 and for an additional $2.99, you get a coloring book/workbook with money activities. MoneySavvy also publishes the MoneySavvy OMG guidebooks for teens, college students and even couples — hitting everyone with some sound money advice. They are perfect stocking stuffers.

Finally, since they’re buried in technology all the time, consider these apps. RoosterMon­ey.com leads you to an app that organizes allowances and teaches good money habits.

GoHenry.com is a similar program that adds a parent-controlled VISA debit card, which lets you track their spending. It costs $3 a month, a relatively low tuition for real-life experience. And iAllowance.com leads you to an app that has been used to pay more than 10 million “allowances” — tracking chore completion and getting kids involved in the work/ money/life decision process at an early age.

These are gifts that won’t be outgrown or forgotten when the holiday lights come down. And you’ll be glad you gave a gift of knowledge that will serve your children and grandchild­ren for a lifetime. That’s the Savage Truth.

Apps that teach about money:

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