With the Holidays coming up and the giving spirit in full motion, I wanted to share something I heard on a radio show regarding giving that stuck with me.
It’s common for people to have a budget for the Holidays and the best laid plans to stick to it. Often, those plans get blown to bits as emotions come into play and wanting to give as much as they can to their kids. I’ve been guilty of it myself.
Here’s what the show recommended: give a total of four gifts per child.
- A gift they want – this could be something your child has been asking about quite often such as a toy, pet, etc.
- A gift they need – this could be music, dance, karate lessons. Or something practical and useful for school, college, etc.
- A gift they can wear – not a ton of explanation here.
- A gift they can read – a good book can go a long way. Additionally, a magazine subscription based on their interests, or age may also be beneficial.
You may also consider a combination of gifts from the above. You could combine the something to wear with something they want – such as a designer piece of clothing, etc.
Though not fool proof, this may help as a guide to not overspend this Holiday Season.
Sterling Raskie, MSFS, CFP®, ChFC®
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Good ideas Jim. In the narrow segment of gifts to kids who are no longer dependents of any other person, if you are contemplating gifting cash, I suggest you consider the recipients longterm cap gain and income tax rates, prior to gifting. If the recipient is in a lower longterm cap gain and/or income tax rate, and they are also in a similar/lower/no tax state, it may make sense to explore directly gifting appreciated stock. For example, your child is 27 and in a TX law school, taking out loans to cover their costs and they have no income. You are in the 15% federal cap gains tax bracket and live in IL. Gifting them a significantly appreciated equity (given the 10-yr bull market, something that might be available) and having them sell it immediately, will allow you to avoid the cap gains tax and the IL income tax. Even if they want to keep the equity as an investment, they should sell and rebuy, resetting the basis to the current market value. Of course this requires discussion and planning, and you should review with your tax advisor. A tax efficient giving post might be worthwhile.