Leveraging Financial Gifts
It might be customary for you to consider generous financial gifts for your children and/or grandchildren at the close of each year. Whether it’s cash, a 529 plan, or gifting security in a brokerage account, finance-related gifts provide a wonderful opportunity to engage and educate loved ones on money matters and family values while quietly contributing to their wellbeing.
Financial gifts are often about making an impact.
The question is, WHAT is your desired impact?
Thoughtful planning can go a long way to leverage an experience like this for both you and your recipient. But before you write a check or transfer stock, let’s confirm your goal(s) in making the gift:
Is it to help the recipient build awareness about saving and investing?
Is it to build a bridge to a financial advisor you trust who could serve as a money mentor?
Is it to give the recipient experience with deferred gratification by having to save for a meaningful life event, like secondary education?
Is it to instill family values related to gratitude and generosity by encouraging the recipient to become familiar with local causes and community issues that they care about while allocating money and volunteer time to make a difference?
It may very well be ALL of the above! Whatever your goal, it’s important to view this meaningful event for what it is: An experiment that aims to build curiosity and knowledge about the role money plays in our lives. When you frame it this way, you’re more likely to have a long-term impact on your recipient’s relationship with money.
Tips for Success
Every financial gifting opportunity unfolds differently. Just as no two recipients are alike, neither are the interpersonal dynamics and or a recipient’s response. Here are several helpful tips to set you up for a more rewarding experience:
Be sure to consult your tax professional to determine what, if any, tax implications are associated with your gift(s).
Grandparents, you should be welcome to give generously, but please remember to share your plans with a recipient’s parents first.
Explain why you’re giving a particular financial gift along with any expectations you might have. Without direct conversation and guidance, you’ll miss the opportunity to fully leverage this special experience.
Always make sure financial gifts are age appropriate. Too much money at too young of an age can be overwhelming and confusing. Think BIG, but start small!
Whatever a recipient decides to do with his/her financial gift, try to refrain from judgment. Instead, approach it with curiosity.
Consider collaborating with a financial advisor prior to the “big reveal” for added support, especially if he/she will be involved with gift administration or may become a resource for the recipient.
Financial gifts revealed with thoughtful consideration have the power to change the course of a loved one’s future. And offer a great opportunity to build financial competence while opening up the lines of communication. Happy gifting!