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Graduation season is here once again. Seniors are committing to colleges, paying deposits, completing FAFSA forms, and preparing for graduation celebrations. As a money-savvy supporter, you want to give the grads in your life something different than a card with cash or a gift card tucked inside. You want something that will not only serve as a graduation gift, but as an investment into their future and encouragement to build wealth in their lives as they venture out on their own.
Even if the grads in your life have months or years to go, it’s never too early to start planning for a financial investment. Whether you need a gift for a 2022 grad or one in the future, here are some financial gift ideas to get you started.
529 Plan Contribution
Contributing to a student’s 529 plan — a tax-advantaged savings plan specifically for future education expenses — can add up significantly by the time they use the funds. These plans are tax-deferred and can be used to pay for higher education-related expenses, including:
- Tuition and fees
- Room and board
- Books and supplies
- Computers
- Student loan repayments up to $10,000
Once the student or their parent opens the account, anyone can contribute to it. For example, a 529 plan contribution qualifies for the annual federal gift tax exclusion.
IRA Contribution
College graduates are often on the brink of opening a retirement account through their employer. However, younger individuals like high school and elementary school graduates aren’t. They could benefit from a head start if you choose to go this route.
Most of the time, a Roth IRA for Kids is a custodial IRA, requiring it to be managed by an adult until the child reaches the age that funds can be transferred to their own IRA. Anyone can contribute to a Roth IRA for Kids, although the total annual payments can’t exceed the lesser of the graduate’s earned income for the year or $6,000.
Stocks
It’s never too early for today’s students to begin investing in the stock market. It’s an excellent opportunity to invest in a grad’s life and also to help teach them about investing in the stock market. You can give a grad stock that you own or buy stock for them by transferring your stocks into a custodial brokerage account. You won’t even pay gift tax unless the stock value is $15,000 or more.
A Consultation With a Financial Advisor
New grads who are ready to begin their journey into the workforce, and those graduating with an advanced degree, are likely about to make more money than they ever have in the past. While this time of life can be exhilarating, it’s often a time when many people make poor financial decisions they later regret. You can help them avoid these mistakes by steering them toward the right path. Pay for a consultation with a financial advisor. Doing so can help them identify their financial needs and goals and determine a plan for meeting them.
The Benefits of Financial Gift Giving
Graduation season is typically busy, with other spring- and summer-time celebrations beginning to rev up. Financial gifts for grads are often beneficial as they can be prepared ahead of time and don’t require too much thought or preparation. You won’t spend hours driving to different stores or shopping online to find the perfect gift. Instead, do a little research, and pull out your checkbook. You’ll be doing yourself and the grads in your life a favor by providing them with lasting financial benefits.
Mark Candler and Dave Owens of Maia Wealth are go-to wealth advisers for lawyers and law firms in Colorado. Specializing in debt reduction, investment management, retirement efficiency, and legacy planning, Mark Candler and Dave Owens are trusted professionals for attorney-focused wealth management strategies in the Denver metro area.