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3 Financial Gifts to Give Your Kids This Holiday Season | The Motley Fool

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

1. Teach them how to invest in stocks

Investing in stocks is a great way to grow long-term wealth, and if you get your kids started at a young age, they might accumulate enough money to meet a wide range of financial goals. To get your kids on the right path, start with an intro as to what it means to even own stocks. Then, talk to your kids about how to choose the right ones and the importance of diversification.

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An even better thing to do for your kids is to open a custodial brokerage account that you manage, and allow them to choose some stocks for their personal portfolios. Your kids may be drawn to companies they know well, or they may be open to learning more about companies they’re less familiar with.

If you have a 15 year old and you let that child buy $200 worth of stocks this year, by the time that child turns 65, that $200 could grow to about $9,400, assuming your child’s portfolio enjoys an average annual 8% return. That return is a few percentage points below the stock market’s average.

2. Open a 529 plan

The cost of higher education only seems to be going up. A good way to help your children pay for it is to open 529 plans in their names.

With a 529, investment gains and withdrawals can be taken tax-free, provided they’re used for qualified education expenses. And these plans are very flexible in that you’re allowed to switch beneficiaries, as needed.

Say you have two children and each winds up with $100,000 in a 529 plan by the time college arrives. If one child gets a scholarship so that they don’t need that entire $100,000, the remainder can be given to your other child without penalty.

3. Show them how to budget

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

Right now, your kids probably don’t have expenses of their own. But you can still teach them how to make a mock budget so they understand the concept.

Better yet, consider sharing your actual household budget with them if they’re old enough to be discreet about the information they come across. That might also give them a newfound appreciation for the various extras they get in life, like vacations or music lessons.

It’s natural to want to shower your children with gifts during the holidays. And while you don’t have to avoid buying video games and toys, it pays to consider adding these financial gifts to the mix. They could be just the things that set your kids up for a lifetime of success.


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