By Iván M. Mendoza, CFA, CFP, CLU, ChFC, CDFA
The holidays are right around the corner. Instead of another trendy gadget, think about giving a financial gift for kids that lasts.
These aren’t just nice gestures; they’re gifts that build wealth, instill confidence, and support long‑term goals. When you pick the right tool, you’re giving your loved ones something they can use, appreciate, and remember.
1. Kick‑Start a Roth IRA
If your child or grandchild has earned income that is reported for tax purposes, a Roth IRA may be one of the most powerful financial gifts for kids you can give. Contributions grow tax‑free.
You as the adult can open a custodial Roth IRA while the minor earns money. You control the investments until the child takes over at adulthood and can match their contributions, up to their earned income. Now you’re teaching more than money; you’re teaching values.
2. Super‑Fund Their College Savings
College costs keep climbing. A 529 plan is a top way to give a financial gift for kids with serious longevity. Contributions grow free from federal income tax. Qualified withdrawals are also tax‑free.
For 2025, you can contribute up to $19,000 per child (or $38,000 if you’re married and giving together) without worrying about gift‑tax paperwork. Even better? There’s a “five‑year election” that lets you front-load five years’ worth of contributions at once. That means a single donor could contribute up to $95,000 or a married couple up to $190,000 at one time and still spread it over five years for tax purposes.
A 529 savings plan isn’t limited to just four-year universities anymore. It can also cover trade schools, vocational training, and registered apprenticeships, as long as the institution is federally approved. Recent changes to the law have expanded what qualifies, now including costs like tuition, fees, books, required supplies, and even certain licensing or credentialing fees for skilled trades. This flexibility makes a 529 plan a great option for supporting a child or grandchild who takes a more technical or career-focused route, offering them alternatives to the typical college experience.
3. Flexible Gifting via a Custodial Account (UGMA/UTMA)
Here’s another clever financial gift for kids. A UGMA/UTMA account is a flexible way to gift money or investments to a child while you, as custodian, guide the process until they’re old enough to take control.
Investment earnings in the account follow the “kiddie tax” rules. The 2025 rules state that the first $1,350 of unearned income is tax‑free, the next $1,350 is taxed at the child’s rate, and anything above $2,700 gets taxed at the parent’s rate.
This kind of account is great for teaching patience, investing, and responsibility. Just know it’s counted as the child’s asset (which can affect college aid) and once you gift it, you can’t take it back.
4. Teach About Inflation by Gifting I‑Bonds
A lesser used but brilliant strategy: gifting I-Bonds. Gifting a Series I U.S. savings bond introduces children to the concept of saving and safeguards against that silent thief of purchasing power. I‑bonds carry a fixed rate plus an inflation‑adjusted rate.
These bonds are low-risk, government‑backed, and accessible. Start with $25 and build from there. They’re a smart part of a household’s toolkit, and a great financial gift for kids that shows how money can work patiently, over time.
5. Let Them Be Shareholders of a Real Company
This one is fun and memorable. Gift stock, perhaps in a company they already know or love, and open a custodial brokerage account. Watching dividends reinvest can be powerful.
Some companies still offer direct stock ownership programs. Or you can use a replica certificate to make it tangible. Turning computing power into a palpable “I own part of this company” moment? Priceless.
Why Financial Gifts Matter
Financial gifts teach important lessons about values and opportunity. A thoughtful contribution teaches kids that money can be a tool, not just a toy. It introduces them to concepts like saving, investing, compounding, and planning for the future. Skills they’ll use for a lifetime.
Unlike toys or gadgets, which may be forgotten after a few weeks, a financial gift grows over time and can help fund education, first investments, or even a first home. Beyond the dollars, it’s a chance to spark confidence and independence. Kids learn that thoughtful decisions today can create meaningful results tomorrow.
Financial Gifts for Kids That Have Long-Term Benefits
Give the gift of knowledge, patience, and purpose. Whether you pick a Roth IRA, a 529 plan, a UTMA, i‑bonds, or stock shares, you’re giving more than money. Every financial gift for kids you choose now becomes part of their story.
If you’d like help selecting which of these strategies fits your family goals, investment timeline and tax‑planning needs, Mendoza Private Wealth is here to help. We work with our clients to tailor a plan that supports your legacy, your values, and your loved ones’ futures.
Get started by scheduling a Fit Meeting here. We look forward to speaking with you!
Frequently Asked Questions About Financial Gifts for Kids
1. What are the best financial gifts for kids that can grow over time?
Some of the best financial gifts for kids include Roth IRAs (if they have earned income), 529 college savings plans, custodial accounts (UGMA/UTMA), I-Bonds, and individual stock shares. Each offers unique benefits for teaching financial literacy and helping wealth grow over time.
2. Are financial gifts for kids tax-efficient for parents or grandparents?
Yes. Many financial gifts for kids (such as contributions to 529 plans or custodial Roth IRAs) can be structured to minimize taxes. For instance, 529 plans allow significant contributions without triggering gift taxes, and gifting appreciated stock can help reduce capital gains taxes for adults while benefiting the child.
3. How do I decide which financial gift for kids is right for my family?
The right choice depends on your goals, the child’s age, and your financial situation. If you want flexibility, a UGMA/UTMA custodial account might fit. For education-focused giving, a 529 plan is ideal. If you want to teach investing and long-term growth, consider gifting stock or opening a Roth IRA. A qualified financial advisor can help tailor the right mix for your family.
About Iván
Iván M. Mendoza is the Managing Principal and a Financial Advisor for Mendoza Private Wealth, a fee-only boutique, private wealth management practice with a focus on research, planning, and investment management. Working with clients in Miami and throughout South Florida, Iván provides investment and wealth planning advice to individuals and families and to their respective trusts, estates, foundations, endowments, and pension plans.
Iván began his career with Prudential in 1999, where he quickly advanced to Manager of Financial Services, overseeing a team of financial planners. In 2012, he joined Sanford C. Bernstein’s private client group as Vice President and Financial Advisor. Driven by his commitment to providing objective advice, he founded Mendoza Private Wealth in 2016. Iván holds multiple designations, including CFA®, CFP®, CDFA®, CLTC®, CLU®, and ChFC®, and is passionate about creating confidence in clients through sound financial planning and investment strategies.
A first-generation American of Peruvian heritage, Iván resides in Miami with his wife, Ana, and their two sons, Emiliano and Alessandro. He enjoys traveling, discovering new restaurants, all things science, World Cup soccer, and staying active through running and biking. An advocate for education, he draws inspiration from his grandfather, a former Minister of Education in Peru, and supports educational causes in his community. Iván is also a music enthusiast with a wide range of tastes, from jazz to reggae to heavy metal. To learn more about Iván, connect with him on LinkedIn.
