Have you started thinking about holiday gifts yet? Instead of spending on toys or gadgets that may quickly lose their appeal, many families are turning to financial gifts for kids and grandkids that offer lasting value. These gifts can help children learn essential money management skills while giving them a strong foundation for building their financial future.
To make it easier, I’ve put together a list of what I consider the most impactful financial gifts for the next generation.
1. Start a Roth IRA for Working Teens
If the child or grandchild has earned income, funding a Roth IRA is a powerful way to set them on a path toward financial independence.
Children of any age can contribute to a Roth IRA as long as they have earned income from a job that is reported for tax purposes, such as wages from a W-2 job. Even if the child only earns a few thousand dollars, contributing that amount now means those funds have decades to grow completely tax-free.
By opening a Roth IRA for them, you can help them build a strong financial foundation early in life. Contributions grow tax-deferred, potentially resulting in substantial long-term financial gains.
To open a custodial Roth IRA for minors, you must specify a custodian who can oversee the account until the beneficiary reaches the age of maturity. Select a custodian who shares your investment philosophy because that person provides guidance and support to the beneficiary.
Opening a Roth IRA at a young age can help them build a strong savings habit and position them for a solid financial future.
2. Buy Stock in a Kid-Friendly Company
Another smart financial gift for kids is buying stock in a company they know and love.
A fun and instructive way to introduce kids to investing is to purchase stock in a publicly traded company that aligns with their interests. For younger kids, this might be Disney or Mattel, while older kids and teens may relate more to companies like Apple, Microsoft, Nintendo, Roblox, Netflix, or Snap. Owning a portion of a well-known brand that they interact with daily can make the concept of investing more tangible and exciting.
Kids might be familiar with these brands through schoolwork on iPads, gaming with friends, or watching favorite shows. Linking their hobbies or routines to real investments can spark curiosity and help them build a long-term interest in financial literacy.
It’s important to note that stock investing entails risk and that the value of investments can fluctuate. But by tracking the ups and downs of companies they recognize, kids can learn valuable lessons about patience, volatility, and the long-term benefits of ownership.
3. Contribute to a 529 Savings Plan
A 529 savings plan is a tax-advantaged plan designed to promote saving for future education expenses. By making contributions to a 529 plan, you can help your child or grandchild save for graduate school, college, or other eligible educational costs. The profit in the account grows tax-deferred, and debits for qualified expenses are most often tax-free.
Opening a 529 account is a fairly straightforward process. Many states provide their own 529 programs with a variety of investment options. You can choose to set up automatic monthly contributions or make a one-time payment. Gifting a 529 plan provides the opportunity to lessen the financial burden of higher education and help your loved ones reach their educational goals.
A 529 savings plan isn’t just for four-year universities. It can also be used for trade schools, vocational programs, and registered apprenticeship training, as long as the institution meets federal guidelines. Thanks to recent updates in legislation, qualified expenses now include tuition, fees, books, required supplies, and even certain credentialing or licensing costs tied to skilled trades. This added flexibility makes a 529 plan a practical way to support a child or grandchild who chooses a technical or career-focused path, giving them options beyond the traditional college route.
4. Open and Contribute to a Custodial Investment Account
Introducing a child to the concept of long-term compound growth and the virtue of investing patience is a valuable and enduring gift. If a Roth IRA or 529 account doesn’t suit your needs due to their specific rules, consider setting up a taxable custodial account in their name and making regular contributions. Investing in broad market indices like the S&P 500 or the Nasdaq 100 can serve as a practical learning tool, offering insights into market fluctuations and the power of compound growth over time. Additionally, contributions to the account aren’t limited to just you; others can contribute as well, with no annual contribution caps.
It’s important to stay mindful of the tax implications for custodial accounts. For 2025, the first $1,350 in earnings is generally tax-exempt at the federal level, while the next $1,350 may be taxed at the child’s rate. Any earnings beyond $2,700 are taxed at the parent’s rate. Also, keep in mind that assets in custodial accounts are considered the child’s assets in financial aid calculations.
Partner with an Advisor to Plan Meaningful Financial Gifts
Giving financial gifts to kids or grandkids can do more than bring joy in the moment; it can set them up for a lifetime of wise money habits. By introducing them to saving, investing, and the principles of financial growth early on, you provide tools that can help them build confidence and independence with money for years to come.
At Tapparo Capital Management, I focus on helping families build lasting legacies through thoughtful, strategic guidance. Together, we can explore financial gifts for your kids or grandkids that align with your family’s goals and create a meaningful impact that lasts for generations.
If you’re interested in giving a financial gift that truly empowers the next generation, reach out today to discuss how to craft a plan that supports their financial journey. Schedule a “Get Acquainted Call” to see if we are a good fit for each other by calling 978-887-1121 or emailing andrew@tapparocapital.com.
About Andy
Andrew Tapparo is a fee-only financial advisor at Tapparo Capital Management, a financial planning firm in Topsfield, MA, helping clients turn their savings into a retirement income that lasts. Inspired by the quote “Choose a job you love, and you will never work a day in your life,” Andy founded Tapparo Capital Management in 1997 with a passion for helping clients enjoy a truly worry-free and fulfilling retirement and experience financial freedom. As a Retirement Income Certified Professional (RICP®), he designs retirement strategies along with sound money management to help clients retire with confidence.
Andy holds a Bachelor of Science in Industrial Engineering from Rochester Institute of Technology in Rochester, New York, and a Master of Science in Finance from Bentley University in Waltham, Massachusetts. Specializing in retirement income planning, Andy completed a comprehensive financial industry education program at The American College of Financial Services and was awarded the Retirement Income Certified Professional® designation. He is frequently quoted in the media as a financial expert.
Andy and his wife, Susan, live in Topsfield, Massachusetts, and have two beautiful daughters. Outside of work, he is an automobile enthusiast, enjoys taking road trips, and loves the Outer Banks of North Carolina. In his spare time, he volunteers with the local high school varsity girl’s basketball team as the team statistician and runs the team’s website. He is passionate about supporting charities that serve our veterans and their families. To learn more about Andy, connect with him on LinkedIn.
