Investments have become a popular gift not only for adults, but the gifts has also become popular among children and newborns. When a friend or family member has a child, more often than not, people are taking a closer look into the types of investments that can be made for the child. There may be a bit of confusion here though. Not every investment type is good to give a baby. What kinds of investments make good gifts for newborns?
College Savings Accounts
Saving for the future is important, especially when it comes to a newborn. You can choose from a variety of college savings plans. Many people put money into the popular 529 college savings plans. There are positives and negatives to these plans. The savings account doesn’t have to be reported on the child’s financial aid forms. However, the account has to be used for education, so if the kid gets a scholarship and has no use for the money, it can be diverted to a sibling. If they have no siblings, the student can use it for grad school or transfer it to themselves for their own children.
Yes, bonds still exist, and they actually make a great investment choice if you don’t have a lot of money to spend on the gift. They offer a slow and steady investment strategy, but there are a few things to keep in mind when choosing the right bond. Usually, you will want to choose I-bonds over EE/E bonds. I-bonds have two interest rates: one fixed and one that adjusts to the consumer price index. U.S. Savings Bonds are simple and safe, and you are able to invest up to $10,000 a year into it.
If I-bonds don’t appeal to you but you still like the idea of giving a savings bond for a newborn, you may want to take a closer look at sub-zero bonds. These mature seven to 10 years, and they are much safer than playing the stock market. If the bond market continues to stay strong, the baby can benefit from your generosity when they are grown up. Like any investment though, there is no way to tell how the bond market will be effected by the economy.
Giving the gift of stocks never goes unappreciated. You can create a unique portfolio to give as a gift for the newborn with companies like Disney, Mattel and Dreamworks. Some of the companies you can invest in provide certificates that you can hang in the child’s room so that they know they have money waiting for them in their future endeavors. Once the child has grown up and finished school is a good time for them to liquidate the stock, or invest it in companies in which they have interest in.
This is a good idea for grandparents. You can give each person (in the couple) a gift of up to $13,000 ($26,000 total) each and not be hit with a gift tax. However, with current savings account taxes being paid by banks, this is not always the best option. This is not a gift directly to the child, but it is given to the parents. This can help with any debts the family has, and help prepare a financially stable home for the baby.
Gift-giving for children can be difficult, especially when it is a baby. When the parents have everything they need, or you want to give something that will mean a bit more than a cute outfit and a box of diapers, check into a few of these gifts. Investing in a child’s future can be the most special gift of all.