6 Smart Financial Gifts to Give Your Kids This Year

American poet Maya Angelou said it best: "When you know better, you do better." The earlier that your kids develop good financial habits, the brighter their financial future will be.

With the holidays right around the corner, now is the perfect time to set your sights on one or more of these financial gifts that will help your kids learn about, respect, and appreciate money.

1. Monopoly

Since 1935, this classic board game has entertained millions of people around the world. Turns out that playing rounds with "Monopoly money" can actually help build real life financial skills, such as negotiation, money management, and diversification. Plus, a round of Monopoly is a good way to practice arithmetic and social skills. (See also: Holiday Gifts: TK Fun Games That Teach Money and Finance)

2. Custodial investment account

Most brokerage firms offer a custodial account that allows children to get a first taste of investing in the stock market under the supervision of a parent or guardian. With as little as $100, you could open a custodial account and let your kid make decisions about what stocks to hold or sell.

In 2017, you can contribute up to $14,000 to a custodial account and still avoid gift taxes. In 2018, the annual federal gift exclusion moves up to $15,000. Your kid's custodial account is under your control until your kid legally becomes an adult, which happens somewhere between age 18 and 21, depending on your state's rules.

A custodial investment account is a great way to get your child excited about investing and let them learn from firsthand experience how the stock market works. (See also: 5 Stocks Your Kids Would Love to Own).

3. Custodial Roth IRA

If your kid is already working a summer job or earning income from their own business, consider setting up a custodial Roth IRA for them. In 2017 and 2018, individuals may contribute up to $5,500 to a custodial Roth IRA. Here are a couple of reasons why this is a good idea:

  • Your child will have the same contribution limit as an adult, making it a real-life lesson in cultivating a good savings habit.

  • Your child can get close to a decade of extra compounding interest for their nest egg.

  • By taking the tax hit now, your child's retirement savings will grow tax-free forever.

  • Your child will have another "sandbox" in which to make real-life decisions with investments.

Just imagine if you knew how life-changing investing in equities could be at such a young age.

That alone may be the best financial gift for your kid this holiday season! (See also: 10 Investing Lessons You Must Teach Your Kids)

4. 529 savings plan

The average class of 2016 graduate left school with $37,172 in student loan debt. If you could do something now to help prevent your kid from having to take out such costly student loans, that would certainly be a gift worth giving. The good news is you can do this by starting a 529 college savings plan. Eligible education expenses under a 529 plan go beyond tuition and academic fees and include expenses for room and board, transportation, equipment, and accommodations for individuals with special needs.

Contributions to a 529 plan grow tax-free and the money is not taxed when it's withdrawn to pay for college expenses. In addition to federal tax savings, more than 30 states currently offer a full or partial tax deduction or credit for 529 plan contributions. (See also: The 9 Best State 529 College Savings Plans)

5. Cash

Yup, cash is still king. Regardless of their age, your kid will always love receiving a few bills as a gift. The main reason to gift cash during the holiday season is that it opens the door to have an ongoing conversation with your kids about budgeting. With a cash gift, you'll have plenty of chances to talk about what they're planning to buy, what they actually purchase, and how much money they have left. From there, you can start making it a habit to sit down with your son or daughter to talk about finances on a weekly or Bi-Weekly basis. It's a good time to catch up about other non-related finance topics as well. (See also: How to Help Your Kid Build Their First Budget)

6. Checking account with debit card and checkbook

Of course, this would be a great place for any cash gifts that your son or daughter receives from relatives and friends during the holidays (and throughout the year).

While a checking account may not be as exciting as a new Xbox or bike, you can be sure that this gift is the one that your child will be using for the longest time. It's important that your kids start to build experience managing a checking account so they understand how to pay for everyday expenses, build a monthly budget, and safely use debit cards. By covering the ins and outs of how a checking account works when they're young, your kid will have one less thing to stress about as they get a little older or go off to college.

No matter what your child's plans are, anyone can benefit from learning how to use a debit card, write checks, access an online account portal, and read a checking account statement.

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6 Smart Financial Gifts to Give Your Kids This Year

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