The Best Gift to Give Your Children for the Holidays

During the Christmas holiday, most families are racing around to find the perfect gift for their children. As your children get older, you may be tempted to give a gift of money to them. Your children will most likely frivolously spend this money on an IPod, video games, etc.

Best gift for the season – Fund in IRA for your children

When our son turned 18, I convinced my wife that we should gift money into an IRA. Funding an IRA is the gift that keeps on giving. Since we funded an IRA at such an early age, we are ensuring a good retirement for him.

How does funding an IRA keep giving?

1. Our son receives a bigger tax refund. For a $2000 deposit, he receive over $500 back on his taxes. How’s is that for a Christmas present.
2. Our son has $4500 in the IRA and is 22 years old. Even if we never invested again, this IRA at 8% annual return would be worth over $100,000 by retirement.
3. It’s awesome estate planning. If we kept this money in our own investments, eventually it would become part of our estate and subjected to death tax.
4. We protected the money. In other words, our son cannot spend it prematurely without sustaining an early withdraw fee. This fact keeps his hand out of the cookie jar.
5. We are teaching him a valuable lesson about saving. He’s proud of the fact that the balance is going upward, therefore, giving him confidence and security for his future.

Best part of this gift is now our son is carrying the torch. He inspired me to write this blog because he asked how much he could put into the IRA this year. I am very proud of him and glad that he has learned a valuable lesson.