×

3 financial gifts for the holidays made easy

Remember how bewildered and disappointed you were as a kid when you got a savings bond from your grandparents during holidays.

Now startups and established financial companies make it easier to give stocks and other financial assets during the holiday season.

No guarantee your children or grandkids will not appreciate your present in the moment, but years from now they will be grateful for your generosity.

Here are some popular financial gifts that may be a little more thoughtful than cold hard cash, a perennial holiday favorite:

Stocks

You have numerous ways to hand out stock over the holiday season.

If you own shares, you can re-title your stock to a loved one through your broker.

People should consider giving stock that has appreciated to avoid capital gains taxes, said Douglas Kobak, a certifiied financial planner and principal at Main Line Group Wealth Management.

"If the child is in a lower tax bracket, they should gift the security to the child and have them sell it where there would be more available on an after-tax basis for the child's need," Kobak said.

Or you can set up a low-cost dividend reinvestment plan (DRIP). You will need to own a share to be eligible for a DRIP, which lets you purchase shares with a company's dividend at little or no cost.

"These gift cards are like a modern-day savings bond." -Avi Lele, Stockpile's CEO and co-founder

Some well-known public companies with brands children would recognize offer DRIPs, such as Walt DIsney and McDonald's, but many high-flying technology companies do not.

With share prices of Google's parent company Alphabet, Apple and Facebook in the triple digits, you might want to get your kids or grandkids a gift card instead.

Stockpile allows people to buy physical gift cards for shares at retailers, such as Kmart and Toys 'R Us, in denominations ranging from $25 to $100. Or buy online gift cards in any amount.

"These gift cards are like a modern-day savings bond," said Avi Lele, Stockpile's CEO and co-founder.

Once people receive these cards, they need to redeem the cards on Stockpile, which is an online brokerage that allows users to buy fractions of a share. About 25 percent of Stockpile's customers are kids and teens, Lele said.

College savings plan contributions

With the rising cost of an education, more parents are crowdsourcing to fund their 529 college savings plans.

Some plans offer features that allow family and friends to gift money directly to the 529 plans, which are flexible and tax-advantaged accounts for qualified educational expenses. Ascensus College Savings, which administers 31 plans in 17 states, provides such a program called Ugift.

"Typically, we see about 40 percent of annual Ugift contributions come in in December and January," said Suzanne Fetky, director of marketing at Ascensus College Savings.

The Gift of College and Leaf College Savings also offer gift cards people can buy that make it easy to contribute directly to a child or family member's 529 college savings plan account.

Individual retirement accounts

Unlike the other two gifts, opening an IRA, whether traditional or Roth, for a child or loved one can be tricker.

"My favorite recommendation is for parents or grandparents to help their children set up a Roth IRA," said George Gagliardi, a CFP at the Trust Advisory Group. "This requires earned income on the part of the child, so it is mostly for older children in their teens or college."

Children can contribute up to the limit of $5,500 in earned income per year.

A gift of IRA provides benefits down the road for when children are 18 years or older, Gagliardi said, because they may qualify for Retirement Savings Contributions Credit.

If their adjusted gross income is less than $31,000 in 2017, they can get a credit from the U.S. government of between 10 percent and 50 percent of their contribution for the first $2,000 that they contribute to a retirement account.

"All it requires for the credit is to fill out a 1040A form and the Form 8880," Gagliardi said.