Make a financial gift for the long term

In my mind’s eye, I can still see the big white envelope nestled in the branches of our Christmas tree weeks before the holiday. For an 8-year-old boy, it wasn’t nearly as exciting as the array of toys that appeared on Christmas morning. But years later, when I cashed in the savings bonds contained in that envelope, I was pretty darned excited. 

And while those toys – not to mention some clothes I never wanted in the first place – are long forgotten, the bonds planted the seeds for my interest in all things money. 

As you survey the youngsters on your gift list this year, consider planting some of those seeds instead of adding to an already full toy box. Initially, the child may give your gift the same indifferent reaction as to a new sweater. But maybe, just maybe, he or she will thank you later.

Here are four ways to take the long view on gifting:

  • Savings bonds These old standbys are still available, but not in the paper form I remember. Today you buy the bonds electronically at, and the recipient will need to open an electronic account to hold them. Another change: now you can buy I Bonds, a type of savings bond that offers an inflation-linked return. Of course, you can always print out a certificate that would fit nicely in a big white envelope. 
  • College savings plans College costs continue to soar, as does the debt load of recent graduates. Fight that trend by setting up or contributing to a child’s 529 college savings plan. These accounts offer a ton of flexibility and some pretty exciting tax benefits.
  • Stock certificates Buy the child shares of a stock, then order and frame the certificate. It’s never too early to drive home the idea of investing for the future, and holding stock is a great way to whet a kid’s appetite. It’s fun to walk into a store or  business with my teenagers and see them roll back their shoulders, push out their chests and exclaim, “I own a little bit of this.” 
  • Savings accounts I encourage folks to start with this basic building block when setting up a solid financial base. It’s not a bad place to launch a child’s efforts, either. We teach our kids to “pay yourself first” by matching any contributions they make to their own savings accounts – which, naturally, they can’t touch until college.
  • Roth IRAs Boy, I wish these were around back when I was mowing lawns. This gift only works if the child is a bit older and has what the IRS terms “compensation” – wages, tips or self-employment income. But if you’re looking to start a long-term project, the potential for decades of tax-free compounding can be attractive.

Whether it’s one of these ideas or another, a plan to enrich a child’s financial life usually starts far from the toy box. 

J.J. Montanaro is a certified financial planner with USAA, The American Legion’s preferred provider of financial services. Submit questions for him online.