Great Financial Gifts for Children

by Aaron Crowe on 11 September 2012 10 comments

Think back to your childhood and the toys you played with, and there's probably a toy you wish you had as an adult to either play with or give to your children. It could be a game, favorite doll, bike, little red wagon, or anything else that sparked your imagination.

For me, after a Big Wheel Racer, I was always fond of piggy banks. I was a geek saver even as a child, and I too often used my allowance money to buy coin sorters and other contraptions to store my change before taking it to the bank to put in a savings account. My favorite was a small, clear plastic case where you put a coin in at the top, and it would roll down a path and fall into a slot for whatever size coin it was. It was an easy way to count coins and helped get me on the road to being a saver.

I've received plenty of other great financial gifts since then, and have bought some for my daughter in the hope of teaching her some financial life skills. Here are some great financial gifts for children. Since children through college age can still use financial gifts, not all here are toys, but they are still great gifts. (See also: 5 Reasons Why You Should Give Kids Cash for the Holidays)

Piggy Banks

The pink little piggy is usually a child's first introduction to saving money. It's where they (and you) can put extra change, giving them a chance to spill the coins out on the floor every once in awhile and learn how to count money. The banks come in many sizes and colors, and one of my favorites is the Money Savvy Piggy Bank that has separate compartments to save, spend, donate, and invest. The Moonjar Moneybox and its compartments to save, spend, and share is also popular. The best piggy bank, however, may be one without a hole in the bottom that you have to destroy to get into.

Play Cash Register

Having fake dollar bills and coins to count and give out as change for "transactions" from your friends is a smart way to learn how to count and learn the value of a dollar. What child hasn't played "store" at home and sold groceries or whatever? A cash register is a necessity for any play business.

Monopoly

What better board game to learn about money than this classic that has been around in some form since 1883 (when it was called "Banking")? The Game of Life also does a great job teaching about spending and saving, but Monopoly is tops for teaching how to manage money. Should you buy that low-rent property? Is it worth it to build a hotel? How can you negotiate with other players to get the properties you want?

Passbook Savings Account

Believe it or not, banks still have these, which still have written ledgers to keep track of balances. It's the best way to learn how to save because it's real money that belongs to a child. I helped my daughter open one in kindergarten so she could put birthday money in it, with the goal of saving for a car or college. The interest rates that these pay are low, so consider moving large sums to other investments such as CDs.

Education Savings Plan

Also called 529 Plans, these investments grow tax-deferred. The donor is in charge of the plan and decides when the money is taken out. Giving a 529 Plan donation to a grandchild, for example, requires having a Social Security number of a parent. In that case, the parent will be the custodian of the account, so the grandparent won't get any tax benefits by donating.

In Idaho, which has 27,000 such accounts with $230 million in assets, a single person with a child can give up to $4,000 annually to their child's 529 account, while a married couple filing jointly can give $8,000 annually, says Idaho Treasurer Ron Crane.

"What a great gift to give to a newborn child or to a kid just starting school," Crane told me in a phone interview.

Retirement Account

Helping children see the long view is difficult, especially if it's 50 years away. Creating a family retirement account is an ambitious step for teens, but one that FamZoo says takes only 30 minutes to set up for a lifetime of savings. Here's how it works — a parent or other relatives matches a teen's earned income contributions to a Roth IRA in the teen's name. Use a savings calculator to show them how much money they'll save in 50 years — usually $1 million or more. A custodial account can be set up for a teen, and the contributions and investments can be made online. It's a smart way to reach the ultimate long-term goal of retirement.

Stock

Buying a child stock in Disney, or any other company they're excited about, is a smart way to teach them about investing, the stock market, dollar cost averaging, and reinvesting dividends. You can often buy stock directly through the company — $250 to start through Disney with minimum additional investments at $50 — or buy through a broker and ask for a keepsake stock certificate.

Besides physical toys and financial gifts, the best financial gifts to give children are continuing discussions about money and the importance of saving it. Without regular talks about how money can be saved and used, you might as well just give them a Big Wheel to ride on without teaching them to ride on the sidewalk only. You don't want them to get run over — whether on a toy or financially.

I'm sure there are other financial gifts out there that are worth giving to kids. What were some of your favorite financial gifts as a kid? Please respond in the comments section below.

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Guest's picture
Nancy

What about I Savings Bonds? We contribute monthly to a 529 education savings plan for our grandson (he is 18 months old). He gets sufficient toys, so I have been thinking about giving him cash for gifts, divided into categories--for saving in his piggy bank, for spending. Or I have been thinking about giving him I Savings Bonds because they pay an interest rate that is guaranteed to be higher than inflation. In this time of low, low interest rates, that seemed like a good idea.

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Dave H.

You have some great stuff here. Thanks!

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Amy Yannello

Nice job on this piece, integrating childhood memories for Boomers and Gen-Xers, with practical advice for teaching saving habits for their children. (I too, fondly remember my piggy bank and toy cash register, playing "store" and Monopoly.) -- Amy Yannello, Sacramento, CA

Guest's picture

It's really sad that financial education has fallen off so sharply in the US over the past 30-40 years. I think it's the biggest reason that so many young families ended up losing their homes in the housing crisis. They had no idea of the risks they were taking with liar loans and balloon payments. Let's teach today's kids not to be suckers.

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Jim Simi

When I found a $20 bill my grandmother took me to a bank and opened a savings acount for me. I received a deposit book and was able to see my interest and balance grow everytime I made a deposit. It taught me the value of saving. I saved enogh for a new bike :)

Great work Mr. Crowe

Guest's picture

I love playing monopoly with my kids.. And I really do think it forces them to tackle some real financial questions.. They have to decide, "Can I Afford It"?.. And consider the pros and cons of Investing vs. Holding Cash reserves.

The best part is that kids can start playing as early as 6 or 7 years old.

Guest's picture

Its a great idea to get kids involved with money management as early as possible. Having rewards like a quarter or dollar for something really good, and then letting them save up to choose something to buy will teach them that saving is really important. I wish I was taught more about money as a kid besides playing Monopoly.

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Guest

This information is a great remedy to the problem of children believing that money simply comes from automatic bank tellers.

Guest's picture

Collecting baseball cards, old coins or stamps teaches kids how to appreciate something that has non cash value. They learn that these things could be worth something someday so they should hold onto them and keep them in good condition. Collecting is another one of life's little financial lessons!

Guest's picture

Although being at the very expensive end of the 'Children's Gifts' scale I could not disagree with one of our clients who gave his son a 1oz Krugerrand for his 10th birthday.

'Sonny' may not fully appreciate the full scale of this gift yet but there is little doubt in my mind that he will be very pleased indeed one day in the future over the 'little heavy coin' that his Daddy gave him.