6 creative ways to give money as a gift
Money is a great gift. But, depending on who you’re giving it to, there may be a better way to do so than writing a check or slipping some cash in an envelope. Teenagers might enjoy the instant gratification of cash, for example, but their parents might prefer you give a gift that teaches those teens about saving. Here are some different options of how to give money as a gift at every age and stage.
Consider a 529 plan contribution for newborns or young children
Contributing money toward a child’s education is a great way to help plan for the future now, whether it’s for a newborn, niece, grandchild or someone outside of your family. Because they are tax-advantaged,1 Section 529 college savings plans are an efficient way to do so. These investment accounts can be used to pay for designated educational expenses—such as college tuition, books or computers. To contribute to a 529 plan you’ll need the account number, and you should use the contribution form that can be downloaded from most plans’ websites. Keep in mind that since a 529 plan is an investment, there is a risk that your contribution could lose value. You can research these plans with Merrill Edge to learn their benefits and considerations before making a contribution.
Cash is a good option for children
Giving young children cash can help them learn about money and math as well as spending responsibly. Teaching children to manage and appreciate money early can create good habits that reward the recipient long past the initial gift.
CDs and savings bonds can help teens learn about money
Unlike cash that a teenager may be tempted to spend immediately, options like CDs, savings bonds, checks or money sent to their account digitally through an app can help teens learn how to manage deposits and balance saving with spending. Online payment systems such as Zelle® allow you to deposit money directly into a teenager’s bank account. Zelle is a free service available through most U.S. banks via their online banking or mobile app.
For occasions like graduation, you might consider opening a certificate of deposit at a bank or purchasing a savings bond from the U.S. Department of the Treasury. While the graduate won’t be able to access the money right away, he or she will appreciate the extra savings down the road.
Go digital, or give foreign currency to young adults
If you know the recipient buys things online, giving them an E-gift card or credit on an app store can make it easy for them to use their gift. Or find out if they have any trips abroad coming up, and consider giving them foreign currency to use at their destination. Bank of America customers can check exchange rates and order currency online.
Gift cards or gift funds are great for newlyweds
In many cultures, cash is a traditional wedding gift. But if you’re looking for more creative ways to give, check if the couple has set up a place to receive cash as part of their registries. Many couples set up gift funds to pay for honeymoons (often called “honey funds”) or other big expenses such as a down payment. If the couple hasn’t set up a gift fund and you’re hoping to give money, consider a gift card to a store where they’re registered. This will allow the couple to purchase any items left on their registry with flexibility.
Charitable contributions work well for adults
Some friends or family members may have everything they need. If that sounds familiar, a monetary donation to a charity they support is a thoughtful gift. Many adults have charities they prioritize and causes that have become important to them over the years; you’ll be acknowledging the recipient’s passion for a cause.
Keep in mind, almost everyone appreciates a cash gift. When in doubt, cash and checks are great staples. If you’re planning on gifting significant amounts, however, be sure to review tax rules.
- To be eligible for favorable tax treatment afforded to any earnings portion of withdrawals from Section 529 accounts, such withdrawals must be used for “qualified higher education expenses,” as defined in the Internal Revenue Code. Any earnings withdrawn that are not used for such expenses are subject to federal income tax and may be subject to a 10% additional federal tax, as well as applicable state and local income taxes. For distributions after December 31, 2017, qualified higher education expenses include tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school. These distributions are limited to $10,000 per calendar year, across all 529 accounts for the same beneficiary. State tax treatment may vary.
Before you invest in a Section 529 plan, request the plan’s official statement from your Financial Solutions Advisor and read it carefully. The official statement contains more complete information, including investment objectives, charges, expenses and risks of investing in the 529 plan, which you should consider carefully before investing. You should also consider whether your home state or your beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds and protection against creditors that are only available for investments in such state’s 529 plan. Section 529 plans are not guaranteed by any state or federal agency.
Investing involves risk including the possible loss of the principal amount invested.
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