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Funding the Next Generation via Christmas Gifting

There is a cute commercial on television this year, showing a child eagerly opening a large gift wrapped box under the Christmas tree. The child rips off the paper, to find a document showing a purchase into a 529 college plan. Eyes roll, interest lags and the child moves rapidly on to find toys that will be trashed within weeks or months and gone by next Christmas.

We gave our grandson his first gift of stock two years ago for Christmas. We opted for a physical share of stock from the maker of his favorite games. The only place I could find at the time to get actual paper certificates was a site called One Share. Although it used to be common to be able to own paper certificates of stock, most companies and brokers now will not issue them.

It took a couple of months to get our framed share certificate. We had to give out the social security number of the child as well as a custodial name of an adult (minors cannot legally own stock). The total price was $115 which included the paper certificate nicely framed with a small engraved plaque saying something like “Your first share of stock”.

Now there are several different sites which allow purchase of a framed paper certificate, including One Share; Unique Stock Gift; and Give a Share .

While not the most efficient way to fund the next generation, these paper shares, in a frame on their wall plus the shareholder correspondence sent to their home can start to make children or grandchildren aware of the world of investing.

My grandchildren are currently 10 and 7. I still enjoy giving them toys, but have started to think ahead a couple of years to the time when I can start to provide more lasting gifts – such as educational experiences or actual investments.

Currently I’m looking into several types of opportunities – none of which are inexpensive.

Educational experiences.

Helping your grandchild learn about money.

We sent our grandson to Biz Wizards Junior Achievement camp when he first became eligible age wise. It was a week long day camp (week days only) from 9 – 3. The facility in his home town was exceptional, being composed of one large open room with the walls lined with ‘businesses’. There was a bank, a cellular company, a radio/tv station and many other types of businesses. He had fun and learned a lot about money terms and business. This year, in the 5th grade, he had an opportunity to go back as part of a school day activity. He was so excited about it that he had his Dad fire up the Dad’s email and my grandson typed up a note to tell us all about it.

The cost was around $200 plus my time to stay the week at their home and provide transportation to and from the camp.

We plan to do the same for the 7 year old when she is old enough.

Giving your grandchild the opportunity to learn a skill.

There are all kinds of summer camps – religious, sports, outdoor skills and more. Now there are also camps to teach (or begin to teach) technical skills. I found a camp provider called ID Tech which has summer camps for school age kids as well as teens. One of their camps I thought would be great, since I’m a computer programer, my son is a computer engineer and my grandchildren love to play games, is one that uses one of their favorites (Minecraft)  to explore game design. For older kids, they have camps to teach Java using Minecraft, as well as many other tech areas  such as robotics, programming, movie making, web design and more.

After reviewing the cost of the above camps, though, the parents and I decided to wait a few years and then re-address the desirability. The Minecraft design camp, for instance, was over $900 per child for a one week day camp.

Travel and learning experiences.

One of the things I consider important in developing the next generation is to provide ample varieties of life experiences to them. Road Scholar has many fine grandparent/grandchild trips. The trips are escorted and involve group activities. As a grandparent, you don’t have to worry about having other adults around to help, about getting from point A to point B, about understanding what will be interesting to your grandchild at each age.

One of the journeys I’m considering is a space camp in Kansas.

Here the kids (and you) can experience what it is like to undergo 4 g’s of force, practice in an F-16 systems trainer, see aircraft being made, work in a space shuttle simulator and much more and you and your grandchild get flight lessons on a Cessna 172.

Remember when you were in school and all your relatives kept asking ‘What do you want to be when you grow up?” How the heck can any kid know if all they ever do is go to school and come home, go to church, or go to the store? Kids have to experience or learn about the possibilities that are out there, as well as figure out if they like those possibilities and could ever hope to earn a living from them.

If you have the money, these inter-generational trips can be great ways to explore different types of life interests. They aren’t cheap, this one is around $1100 (each), but includes lodging, meals, activities, field trips, lectures and performances. You have to get yourself to the location as well, which will mean additional expenses.

Providing actual investment funding for them is a bit more complicated.

There are multiple considerations in giving money or other financial assets to children. Among which are:

  • Your annual gift tax exclusion amount (current $14000 per recipient per giver)

Under 2014 tax law, you are allowed to give away $14,000 to as many people as you want each year, without affecting your lifetime tax exclusion amounts.

  • The child’s ability to handle the money or assets when they reach an age of majority

It often is not the best idea to make large sums of money available to kids at age 18. It tends to derail them from figuring out who they are and what they want to do with their life.

  • The affect of adding to the child’s net worth, in regards to their eligibility for college scholarships

If assets are held in the child’s name, scholarship boards will expect the child to use that money for college and will tend to withhold scholarships.

  • Minors cannot have financial accounts in their own names.

Typically you have to put the money in a trust, or provide a custodian for the child for the money (such as holding it in an UGMA or UTMA or 529 account).

Perhaps the best scheme would be give them cold, hard cash and then create a matching program – anything they have left by the next Christmas will cause that money to be matched by you?

Do you ever get tired of seeing all the Christmas toys cast aside before the next year?  Please share your experiences in using the holidays to fund the next generation.

Start the intelligent conversation!

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