3 financial gifts to give to your children this holiday season

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With supply chain issues causing inventory issues at retailers across the country, many parents are scrambling this holiday season to get their hands on the perfect gifts for their kids. But rather than spinning your wheels trying to find the most popular gaming system or gadget, you might consider giving your kids these important financial gifts.

1. Teach them how to invest in stocks

Investing in stocks is a great way to build long-term wealth, and if you start your kids at a young age, they could build up enough money to meet a wide range of financial goals. To get your kids on the right track, start with an introduction to what even owning stocks means. Then discuss with your children how to choose the right ones and the importance of diversification.

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An even better thing for your children to do is open a custody brokerage account that you manage and allow them to choose stocks for their personal portfolios. Your kids may be drawn to businesses they know well, or they may be willing to learn more about businesses they are less familiar with.

If you have a 15-year-old child and you let that child buy $ 200 worth of stocks this year, by the time that child turns 65, that $ 200 could be up to about $ 9,400, assuming your wallet. child benefits from an average annual return of 8%. This return is a few percentage points lower than the stock market average.

2. Open a 529 plan

The cost of higher education only seems to be increasing. A good way to help your kids pay is to open 529 plans in their name.

With a 529, investment gains and withdrawals can be made tax-free, as long as they are used for qualifying educational expenses. And these plans are very flexible as long as you are allowed to change beneficiaries as needed.

Suppose you have two children and each ends up with $ 100,000 in a 529 plan by the time college arrives. If a child obtains a scholarship so that he or she does not need the full $ 100,000, the remainder can be returned to your other child without penalty.

3. Show them how to budget

Budgeting is a skill that can come in handy in adulthood. In fact, for some people, following a budget is the key to achieving essential goals, like buying a home or building a retirement nest egg.

Right now, your kids probably don’t have any personal expenses. But you can still teach them how to do a shadow budget so that they understand the concept.

Better yet, consider sharing your actual family budget with them if they are old enough to be discreet about any information they come across. It might also give them a new appreciation for the various extras they get in life, like vacations or music lessons.

It is natural to want to give gifts to your children during the holidays. And while you don’t have to avoid buying video games and toys, it’s worth considering adding these financial giveaways to the mix. They could be just the things that set your kids up for lifelong success.

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