11 Nov Giving money as a holiday gift

Q. For the holidays, I want to give money to my kids. But I don’t want them to spend it on just anything. I want them to save it or use it to pay off debt. How can I make that happen?
— Dad

A. You’ve got lots of options for interesting holiday gifts.

One option is to give their retirement planning a boost by opening an IRA or Roth IRA for them.

“You can put up to $5,500 a year into an IRA or Roth IRA as long as they have the earned income of that amount,” said Brian Power, a certified financial planner with Gateway Advisory in Westfield. “These accounts are not meant to be accessed until after the age of 59 ½ and would be a wonderful way to start them saving toward retirement.”

You didn’t say how old your children are or if you’re a grandparent yet, but you could open a 529 in your grandchildrens’ names.

“This is a very tax-efficient college savings account that would help them with the future burden of funding their child’s college education,” Power said.

You can also open a Roth IRA for your grandchildren.

If you want to be sure they use any gifts to pay down debt, you shouldn’t write a check to your kids.

Instead, write the check directly to their credit card company or student loans, Power said.

With any of these gifts, you must keep in mind that if the gift is above $14,000 in a calendar year, it must be reported to the federal government so they are made aware of it and can track larger gifts, Power said. Be sure to speak to your accountant if the gift will be larger than $14,000.

You may also want to consider getting them, as a gift, a sit-down with a financial planner. The advisor can help to set your kids on a smart path to build wealth over their lifetimes.

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This story was first posted in November 2015.