30 Nov Should I give cash or an IRA for Christmas?

Q. The end of the year is coming and I can’t decide if I should gift my adult children cash or open IRA accounts for them for Christmas. I don’t think they save for retirement at all.
— Dad

A. Your ideas are both very generous, but if your children are not savers, you could be disappointed with what happens to a cash gift.

Forced saving, though, is a different story.

Opening IRA accounts for them is a possibility, but you might want to consider a Roth IRA instead, said Jerry Lynch, Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton.

Your children can then benefit from tax-free growth for years to come.

Balancing the choice between cash and any IRA, Lynch said, isn’t a hard choice.

“If you give people money who don’t save, they will spend it and not add anything positive to their life,” Lynch said. “If you set them up with a Roth, more likely than not, it will continue to grow, but they still have the ability to invade it and spend it.”

If you have money to give, your question brings up another issue: your own long-term financial plans.

Lynch said you should take a look at your estate plan, especially if you’re concerned that your children are not saving now.

“When they inherit money, they will probably not save that either,” he said. “Put the funds in a trust and make sure they get paid out over time.”

If you do the IRA, make sure they’re eligible and not already saving so you don’t save more than the maximum for the year.

Or consider a different kind of gift: a meeting with a financial advisor who can help your adult children get on the right track.

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