BY: ANDREW STEWART
No matter how old you are, getting a gift is always an enjoyable time. That is of course if it’s a good gift. When buying for kids, you usually go down one of two routes. The first route is buying toys, which will make you the favourite uncle, brother, father or pretty much favourite anything. The second route is buying clothes, which makes you the most hated person this kid has ever seen. But there’s a third option that a lot of people don’t explore. A savings bond, GIC or RESP contribution probably won’t be the gift that gets the most attention on Christmas morning, but it just might end up being the one that is most appreciated.
What if, you decided to give your son, daughter or grandchild something that begins to teach them the importance of finance in their lives? Or if a newborn has a plan that is fully paid for by the time they are twenty years old that will give them the freedom to: study any program anywhere around the world, buy their own home, purchase their first car or starting their own business one day.
Financial gifts have merit beyond the obvious monetary rewards. Parents and grandparents should consider making smart financial gifts because they can help children achieve something that would otherwise not be possible.
Even people with modest incomes should consider long-term investments when choosing gifts for children these days. Your personal financial circumstances, level of risk and mindset for creativity are all factors to be considered when setting up such gifts, so make your choice so everybody involved benefits; especially you.
Cash & Piggy Bank
The first and most obvious gift that you can give would be cold hard cash. I remember on Christmas day my dad would always give me and my brothers and sisters cash in a card. We would always wait anxiously and save it for last to open to see what colour the bills would be. There is any number of piggy banks out there designed to help children begin learning money management.
The problem with giving cash as a gift is that it really doesn’t do anything to teach children about being responsible with their money. The cash wasn’t really earned so the value it holds isn’t much. While you are certain to be hugged and praised for quite some time, you can do better.
Toy wallet and money, my daughter loves playing with my wallet. She pulls all the cards out, looks at them, and then places them back in the wallet perfectly. It’s quite impressive actually.
A step up from cash, savings bonds can be absolute torture to a young kid. Having something so close to cash, yet being years away from being able to spend it is a great way to teach patience. (And a great way to be hated as well!)
Stock in a Company of Their Choice
Getting a little more complicated now. Giving stocks to a baby as long-term investments is not a wise move for risk-adverse people, but if you like to walk on the wild side, you can show your creativity by putting together a mini-portfolio of fun stocks like Disney, Facebook or Amazon. If your child is a bit older, maybe it’s time to go beyond the saving and spending lessons and teach them about investing. Give them $25-$50 as a gift with the caveat that they must use it to purchase stock in a company. Show them how to sign up with an online broker.
College or University Savings Account
An RESP is, in essence, a government program for students to use for paying school tuition. Anyone can contribute to a student’s account and as long as the child is under 17 years of age. The immediate benefit is you can apply for the government to make a 20% matching contribution based on your monthly or annual contributions.
Child Plan™ is a “Participating” Whole Life Insurance Plan. It’s the only tax-free investment parents and grandparents can open for their children and grandchildren in Canada. With Child Plan™, your child or grandchild will receive a tax-free annual dividend for life.