Financial gifts for the holidays

- Marie Vanerian of Merrill Lynch suggests that buying holiday gifts that kids love and setting aside money for investing should go hand-in-hand. Here are a few ideas about how to give gifts with the best return on happiness:

Stuff their stockings with stocks: While toys, dolls and gadgets are holiday season staples, parents should consider an additional gift of stocks as stocking stuffers. For example, giving a new-born $100 of Disney stock each year until they turn 18 can add up to more than $9,000 by the time they are ready for college. Of course, past performance is no guarantee of future results - families seeking this option should consult with their financial advisor.

Put aside money toward college: Setting aside even modest amounts for college, such as $50-$100 per month can make a big difference by the time kids are ready to hit the books.  In fact, $100 per month invested in a high-quality, balanced mutual fund, could turn into almost $40,000 by the time junior turns 18, assuming a 6 percent average annual return, beginning at birth. Enrolling your kids in a 529 College Savings Plan allows you to compounded savings tax-free. Skipping that second video game by putting the equivalent amount into college savings account will be far more beneficial in the long run.

Savings bonds make great financial gifts because they grow steadily and can earn interest for up to 30 years.

IRA Contributions.  If a child has earned income from a job you can fund his or her annual contribution.

Get grandparents involved: Grandparents, often the most generous gift givers in a family, find themselves considering making large gifts to their families during the holiday season. Until December 31, wealth transfers of up to the $14,000 maximum avoid current gift taxes and future estate taxes. Grandparents often struggle with what to buy the little ones. Since they also have the most experience when it comes to financial matters, perhaps a gift college contribution, along with any wisdom they can impart about how important planning for the future is, might be the greatest gift of all.  And while grandchildren may not appreciate the lesson right away, they may come to value the advice as they grow older.  And parents should be thrilled to not have a basement full of toys from grandma that no one seems to care about come February 1!

Consider charity: Generosity is a big part of the holidays - many tend to give not just to friends and family, but also for charitable causes significant to them. Charitable giving during the holidays can both be financially beneficial for families during the tax season and can become an eye-opening experience for the whole family.

Perhaps the most important thing you can give a child is the ability to watch you make good financial decisions. If you teach them about the importance of saving and investing you are providing a gift for a lifetime. 

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