This holiday season, your children or grandchildren’s holiday wish list probably includes a variety of toys, gadgets or clothing. While these are exciting gifts, consider giving them something that has long-term potential and will make a bigger impact on their life further down the road. Certificates of Deposit, 529 College Savings Plans and Roth IRAs are financial gifts that you could consider giving your child or grandchild this holiday.
Certificate of Deposit
CDs are time deposits, held for a fixed term by a financial institution and can have a fixed or variable interest rate. Since it is intended that the CD is held until maturity, these are great gifts for children as they won’t need the money for many years. A longer-term CD will generally yield higher interest rates, allowing the recipient to withdraw both the deposit and accrued interest later in life to make a milestone purchase. Ask a Delta Community branch representative about different rates and minimum deposit requirements.
529 College Savings Plan
It is currently estimated that by 2028, a four-year private college education could cost over $300,000! A college savings plan is a smart way to start saving for your child’s or grandchild’s future. 529s are invested in a specific state and can be used to pay the costs of qualified colleges nationwide. In addition, the owner of the account has complete control over it so the recipient can only spend the money on expenses related to their education.
You can add as little as $15 with a deposit or even have a set amount taken out of your paycheck each month, so it becomes part of your monthly budget. In addition, anyone can add to the account as a gift.
A Roth IRA is a special type of retirement plan that is generally not taxed. If your child has a job of any sort, you can contribute the amount of his or her earned income up to $5,000 to the account. Since contributions are made with after-tax dollars, the account will grow tax free. The recipient is eligible to take tax-free withdrawals out of the matured account after age 59 ½. The growth potential is impressive – a Roth IRA gift of $1,000 for a 16-year-old that earns 7 percent annually will be worth over $27,000 at age 65!
Giving these financial gifts doesn’t have to be boring either. If you decide to give a 529 plan to your grandchild, wrap hats or banners from his or her favorite college to show them the end goal. You can also give them play money to show how much their Roth IRA will grow over time.
Your local Delta Community branch representatives are always happy to talk with you about financial gift options, so come pay us a visit and learn more today!
Submitted by Autumn