Finding the right gift for kids and grandkids isn’t always easy. Toys break, trends change, and clothes are quickly outgrown. That’s why more families are considering financial gifts that last far longer. A contribution toward savings or services not only provides real value but can also introduce healthy money habits and teach lessons around responsibility.
To help you think through the possibilities, I’ve put together a list of financial gift ideas that can make a meaningful impact for the next generation.
1. Jump-Start Saving with a Roth IRA (for Working Teens)
Children who have earned, taxable compensation (from a job or self-employment) can contribute to a Roth IRA up to the lesser of their earned income or the annual IRA limit ($7,000 for 2025). A custodial Roth IRA keeps an adult in charge until the child reaches the age of majority. Maintaining basic records of the child’s earned income is important. Contributions can be withdrawn tax- and penalty-free; earnings are tax-free if withdrawal rules are met.
Tip: Families sometimes “match” a teen’s earnings with a gift (subject to gift-tax rules), as long as the total contribution doesn’t exceed their earned income or the annual limit. (For 2025 the annual gift-tax exclusion is $19,000 per recipient.)
Opening a Roth IRA at a young age can help them form a strong savings habit and be positioned for a solid financial future.
2. Make Investing Tangible with Shares of Familiar Brands
Another smart financial gift for kids is buying stock in a company they know and love.
A fun and instructive way to introduce kids to investing is to purchase stock in a publicly traded company that aligns with their interests. For younger kids, this might be Disney or Mattel, while older kids and teens may relate more to companies like Apple, Microsoft, Nintendo, Roblox, Netflix, or Snap. Owning a portion of a well-known brand they interact with daily can make the concept of investing more tangible and exciting.
Kids might be familiar with these brands through schoolwork, gaming with friends, or watching their favorite shows. Linking their hobbies or routines to real investments can spark curiosity and help them build a long-term interest in financial literacy.
Since the value of investments can fluctuate, tracking the ups and downs of recognizable companies provides kids valuable lessons about patience, volatility, and the long-term benefits of ownership.
3. Help Them Save for College With a 529 Savings Plan
A 529 savings plan is a tax-advantaged plan designed to promote saving for future education expenses. By making contributions to a 529 plan, you can help your child or grandchild save for graduate school, college, or other eligible educational costs. The profit in the account grows tax-free (if used for qualified expenses), and debits for qualified expenses are most often tax-free.
Opening a 529 account is a fairly straightforward process. Michigan offers several options, including the Michigan Education Savings Program (MESP). Contributions can later be used toward expenses at local institutions like Northwestern Michigan College or even out-of-state universities.
With a 529, you have the choice of setting up automatic monthly contributions or making a one-time payment. Gifting a 529 plan provides the opportunity to lessen the financial burden of higher education and help your loved ones reach their educational goals.
4. Teach Long-Term Growth With a Custodial Investment Account
Introducing a child to the concept of long-term compound growth and the virtue of investing patience is a valuable and enduring gift. If a Roth IRA or 529 account doesn’t suit your needs due to their specific rules, consider setting up a taxable custodial account in their name and making regular contributions. Investing in broad market indices like the S&P 500 or Nasdaq 100 can provide a practical learning tool, offering insights into market fluctuations and the power of compound growth over time. Additionally, contributions to the account aren’t limited to just you; others can contribute as well, with no annual contribution caps.
In a region like Northern Michigan, where entrepreneurship and small businesses are part of the local economy, a custodial account can also be a way to encourage kids to invest in the broader economy or even consider business ownership down the road.
It’s important to stay mindful of the tax implications for custodial accounts. These accounts are irrevocable and typically become the child’s property at the age of majority (often 18 in Michigan, depending on how the account is set up). Be mindful of:
- Kiddie tax: For 2025, the first $1,350 of unearned income is tax-free; next $1,350 taxed at the child’s rate; amounts over $2,700 taxed at the parent’s rate.
- Financial-aid impact: Assets held for the child can count more heavily in aid formulas.
Let’s Build a Financial Legacy for Your Loved Ones
Giving kids and grandkids financial gifts goes beyond mere generosity; it’s an investment in their future. When you introduce young family members to concepts like saving, investing, and compound growth, you’re equipping them with lifelong tools for financial success.
The Black Walnut Wealth Management team understands the unique values and lifestyle of Northern Michigan families. We specialize in helping families like yours create meaningful legacies, and our personalized guidance and long-term strategies can help you align your financial gifts with your priorities.
Thinking about financial gifts for kids that go beyond the holiday or birthday moment? Let’s talk about how we can build a thoughtful plan to give your loved ones a strong start on their financial journey and foster confidence that lasts for generations. Schedule a 15-minute introductory meeting by calling us at (231) 421-7711 or using our online calendar.
This material is for informational/educational purposes only and is not investment, tax, or legal advice, nor an offer or recommendation to buy or sell any security or strategy. Investing involves risk, including possible loss of principal. Past performance does not guarantee future results. Examples and brand/company names are illustrative only and not endorsements or recommendations. Roth IRA contributions require earned, taxable compensation; annual IRS limits and income-based phaseouts apply. 529 plans tax treatment varies by state; consider your state’s benefits and consult a tax advisor.
