Tis’ the Season

As the gift-giving season is upon us, parents, grandparents, aunts and uncles are either braving the malls or shopping online for that perfect holiday gift. Recently we have had inquiries from clients regarding other suggestions we might have for gift-giving that might be more beneficial for their young loved ones.
For many years, I have counseled my clients to give a small gift because no one wants to walk in empty handed to a gift exchange. However, supplementing that gift with a contribution to a college savings account may prove beneficial.

Michigan residents may want to consider the MESP (Michigan Education Savings Plan), the State’s 529 Savings Plan. Contributions to this plan are deductible on one’s State income tax return up to $5,000 per person, or $10,000 for a married couple. The funds grow tax deferred and amounts can be withdrawn tax free if used for qualified educational expenses.

I have had the pleasure to see these accounts come to fruition and the positive impact these accounts have had on easing the financial burden for both the parents and students. The beneficiaries of these accounts may not have been particularly grateful over the years of contributions, but when they receive their first college tuition bill they certainly sing a different tune!

Another opportunity to give more than just a sweater or videogame is the gift of educating our younger generation on the power of compounding. You may want to start contributing to an UGMA account and explain to the young person the value of investing. This is an opportunity to explain what a stock, bond, mutual fund, or ETF is and allow them to help with the investment selection.

I had a recent conversation with a friend and she had an interesting story to share. Every year, her brother-in-law sends a check to each of her sons for $100 and he leaves “Payable To:” blank. He has instructed his nephews to make the check payable to a charity of their choice and asks that they send him a note detailing why they selected a particular charity. I thought this idea was absolutely brilliant and I am implementing the same plan for my family this year. The children and young adults learn to research a charity and give back to their community.

There are plenty of options for gift giving this season that do not include contributing to the gift parade but could offer valuable life lessons, assistance with college education funding, or paying our blessings forward.

Happy Holidays!

Suzanne M. Antonelli, CFP®