Congratulations on your recent college student’s graduation! They are on their way toward making a life for themselves and you want to recognize that accomplishment with a gift.
You might be tempted to give them money, which of course they probably need, even if they’ll benefit from the government’s recent announcement of a student loan forgiveness program. But, that money will probably be spent almost as soon as it hits their pocket.
Why not give them a more long-lasting gift such as a gift of investment?
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Match Their Savings Contributions
It can be hard for a recent graduate to save money, especially if they’re not hired into a position that pays what they will eventually be worth. You can help them learn how to save by opening a savings account, making an initial deposit, and matching a portion of their own contributions to the account for a certain amount of time. This will show them how quickly their savings can grow and how they can pay for what they want in cash if they’re just patient.
Be careful not to contribute over $16,000 to any one individual ($32,000 if you’re giving it away as a couple) because otherwise your lifetime gift exemption amount will be reduced. Additionally, your graduate may have to pay taxes if the gift is over a specific amount, so check with a financial advisor to make sure you follow all IRS guidelines.
1. Give Stocks
A lot of young people find the stock market intimidating and if they don’t start investing in it when they’re young, they may never do it. Help them get a start in stock market investments by gifting them stocks that they’re likely to be interested in. These might include popular clothing brands, sports-related brands, gaming companies, technology businesses, and more. Help them learn how to track their growth and how to sell their stock if they want to invest the money in a different one.
If you don’t want to assume which stocks your graduate will want, assist them with opening a brokerage account and purchasing a few stocks they’re interested in. They may not do well, but that will be part of the lesson. And, the good news is, they’re young enough to recover from a loss if they do make a mistake.
2. Fund an IRA
Whether or not your graduate gets a job that offers a 401(k), having a Roth IRA is an excellent way for them to get a start on their retirement. They may not understand why they should be thinking about retirement now, but opening a Roth IRA allows you to explain how compound interest works and why this gift is going to be something they’ll really appreciate in 50 or so years.
A Roth IRA is also flexible enough that your graduate can take out money if they need it without a penalty, although you’ll want to encourage them to leave it there and not touch it. You’ll also need to ensure they are making enough money to contribute the minimum amount to the account each month.
Conclusion
You don’t have to get a recent graduate the same old gift of money, gift cards, or other items that will be appreciated but gone immediately. Get them the gift of long-term financial stability by helping them learn how to invest.
