gifting your children/grandchildren

[jenn_jenn]

The advice to redirect family gifts towards college can still applied to your average family. I don’t think most people expect their extended family to fund their kid’s college expenses but even a few thousand dollars over the years helps and is better than a bunch of excess “stuff”.

Most families have way too many toys than they know what to do with. It’s very wasteful and can be stressful on the parents too. My brother’s living room is literally overflowing with toys. They do their best to manage but between both sets families and all their friends, those kids get so much stuff.

My nephews are 5 and 2. I get them something small for their birthday and Christmas every year (this year was books and those KiwiCo educational boxes) and have started investment accounts for them that they don’t know about that they’ll get as their high school graduation present. It won’t amount to much (my goal is $10k/ea) but it’ll be better than nothing and I didn’t add to their ever growing mountain of consumerism junk in the process.

[Like2Plan]

My sister and I had talked about this as gift giving for the extended family, although it never really got much traction. Likewise, I had talked with my S-I-L about a plan and again it was just talk and no action.

Ultimately, beside myself and my sister (we had a comprehensive savings plans for our kids) the only individual (of the extended family) who had any college savings when it was time to go to college was the one that I was the owner on the account.

Having gone through this for a couple of generations, I think jenn_jenn has the right idea (I'm assuming she is keeping the accounts in her own name and then transferring ownership when the nephews come of age so as not to complicate her nephews' parents taxes for any taxable events).

[scfr]

I do similar to jenn_jenn small gifts to open + contributions to the 529s. I started when they were born; I didn't send physical baby gifts but the first smallish $$ contributions. When they were babies, just money (birthday, Christmas, Valentine's day). Once they were old enough to know what was going on, a small gift to open and then $ to the 529s. We're talking hudreds per year, not thousands, but it adds up to thousands over the years especially considering that money has been invested in Vanguard mutual funds and has had time to grow. Does it pay their entire college bill? No. Does it max out their college plans? Heck no. Does it make a difference? As long as you are not an all or nothing thinker, yes, it absolutely does. If I can make the financial part of college a bit less stressful for them, and/or save them a couple years of student loan payments, it's worth it to me.

Sending money to the college fund is also a way to say "I believe in you and your future is important to me." And without saying a word, you can teach some financial lessons. My niece always appreciated the financial gifts. My nephew did not - he'd say something like "money again?" and kind of roll his eyes. So it warmed my heart so much to receive his Christmas thank you note this year. He's now a sophomore in high school and he wrote, "I'm starting to think about college and I understand how useful all the money you have sent." It actually made me tear up a little, because for so many year's I've been deferring the gratification of having him gush over the latest toy or video game. (I do make an effort to make the small gift he opens useful and something he'll like and every once in awhile I do a bigger physical gift and less money, but the emphasis has definitely been on the college savings.)

This conversation reminds me of "does the latte factor really matter?" conversations. You either believe in the power of small incremental changes or you don't. People think about these things differently, and there is legitimacy to both sides of the argument.

[LivingAlmostLarge]

JennJenn how much are you thinking you'll need to save to get to $10k by 18? That seems like a lot.

SCFR how much have you saved for your niece and nephew? Was it $100/year? More? Absolutely I think it's important. I just want to know how much I should have invested. I have tossed it into a savings account but sadly for the past 12 years the savings account has been paying less than 1% so the $1200 gained not much another $100 over the past 12 years. I probably should have matched it. But instead I saved for our kids. I guess I should have put more into a taxable account to get the minimum into VOO. Instead I stuck my parents $50 gift birthday and christmas into their savings accounts.

[jenn_jenn]

JennJenn how much are you thinking you'll need to save to get to $10k by 18? That seems like a lot.

$250/year per kid assuming an 8% annual growth rate gets you to $10k. The beauty of compound interest.

$150 for their birthdays and $100/ea at Christmas.

If we don’t see those returns, I plan to just top it off. Assuming we continue to be in a good financial position. Remember $10k in 18 years is not the same value of $10k today. I don’t really expect this to make a big difference for them at all but it’s better than nothing.

[LivingAlmostLarge]

So $100/year at 8% a year = $4044. I probably should have invested the $100/year into VOO instead of a savings account. It just didn't seem like a lot at that time. It didn't seem like it would add up $50 a birthday and $50 a christmas. My in-laws did not gift our children anything for their birthdays or christmas. So they only consistently got $100/year from my parents other than what we saved. Nothing from my BIL (DH's brother younger), my step siblings nothing, so there wasn't much by way of gifts.

[scfr]

JennJenn how much are you thinking you'll need to save to get to $10k by 18? That seems like a lot.

SCFR how much have you saved for your niece and nephew? Was it $100/year? More? Absolutely I think it's important. I just want to know how much I should have invested. I have tossed it into a savings account but sadly for the past 12 years the savings account has been paying less than 1% so the $1200 gained not much another $100 over the past 12 years. I probably should have matched it. But instead I saved for our kids. I guess I should have put more into a taxable account to get the minimum into VOO. Instead I stuck my parents $50 gift birthday and christmas into their savings accounts.

Currently $250/year each. Started them out with $250 at birth. Birthdays, Christmas & Valentine's Day (when they were younger I did less ... don't recall exactly but maybe half what I'm doing now. I've adjusted upward for inflation and then when it became clear they were on a sensible college path. I don't care what they major in as long as they are fairly serious about their studies.) $250 at HS graduation. Continuing gifts through college.

They live in NY. My understanding is that NY has one of the best college savings plans (low costs, good investment options --- Vanguard index funds). And they have a decent selection of state schools (not that they have to attend a state school, but it's nice they have options close to home.)

I have their UGift codes and I just log on and contribute directly to their 529s. That makes it really easy, both for me and for my sister. Also, I know with certainty the money is going in to the 529 (not a concern with my sister but with some familes that might be an issue.) It wasn't like that when they were born. It's gotten easier with time.

I don't meddle with my sister's choices for them as far as how the money is invested. I've offered advice twice. Once when I looked at the plan and told her I thought it looked really good and explained why I'm a fan of Vanguard Index Funds. And when they got older I mentioned that she might want to look at shifting their investments to more conservative ones as they get closer to college. I left it there and trusted her to do right by her kids.

According to the plan's web page, out of staters can have NY plans. I don't know if that's a good option for anyone who reads this (including you LAL) but it couldn't hurt to take a look!

[LivingAlmostLarge]

Currently $250/year each. Started them out with $250 at birth. Birthdays, Christmas & Valentine's Day (when they were younger I did less ... don't recall exactly but maybe half what I'm doing now. I've adjusted upward for inflation and then when it became clear they were on a sensible college path. I don't care what they major in as long as they are fairly serious about their studies.) $250 at HS graduation. Continuing gifts through college.

They live in NY. My understanding is that NY has one of the best college savings plans (low costs, good investment options --- Vanguard index funds). And they have a decent selection of state schools (not that they have to attend a state school, but it's nice they have options close to home.)

I have their UGift codes and I just log on and contribute directly to their 529s. That makes it really easy, both for me and for my sister. Also, I know with certainty the money is going in to the 529 (not a concern with my sister but with some familes that might be an issue.) It wasn't like that when they were born. It's gotten easier with time.

I don't meddle with my sister's choices for them as far as how the money is invested. I've offered advice twice. Once when I looked at the plan and told her I thought it looked really good and explained why I'm a fan of Vanguard Index Funds. And when they got older I mentioned that she might want to look at shifting their investments to more conservative ones as they get closer to college. I left it there and trusted her to do right by her kids.

According to the plan's web page, out of staters can have NY plans. I don't know if that's a good option for anyone who reads this (including you LAL) but it couldn't hurt to take a look!

How much did they end up with $250/year and invested? Versus me putting it in a savings account.

[scfr]

I don't know because: 1. I don't have access to the statements (nor do I want or need access), and 2. I wasn't the only one contributing.