A mutual fund might not be at the top of birthday wish lists, but giving your child the tools to be smart about money is priceless. So before you hit the mall for a must-have toy or electronic gadget, consider surprising them with money-smart gifts.
"Whether it's at the zoo or at home, the cost of a birthday party can easily exceed a couple hundred dollars ? especially if there is more than a handful of guests," says June Walbert, financial planner with USAA Financial Planning ServicesSM. "By using just a small portion of that budget, you can start your child on the road to building financial security and responsibility."
Walbert offers these four fiscally fit gift ideas for kids, tweens, and teens:
Birth to 5-years-old: A Tuition Tradition
In a recent survey by USAA, parents of college-bound teens estimated that they have saved an average of $10,570 for their children's college education. Today, that would pay for only one year of costs at a four-year public university.
Thankfully, parents of young kids have time on their side, along with savings tools that allow family and friends to help save. For example, state-sponsored 529 plans allow grandparents and family friends to contribute funds for college, and some state plans can be opened for as little as $250 with $50 per month contributions. While your children may not ask Grandma and Grandpa for a college savings plan this year, it's sure to be on their wish list as they get older.
6- to 10-years-old: Bank on Birthdays
A piggybank may seem old-fashioned, but it's a gift that can help teach kids one of the most valuable money lessons ? saving. Start with a small contribution in the bank, or a savings account for older children. Some financial institutions offer savings accounts specifically for children that can be opened for just $1.
To help your child get excited about saving, consider matching your child's contributions dollar for dollar throughout the year.
"Waiting until there's enough money in the account to buy something new teaches kids the importance of buying what they can truly afford," says Walbert. "That mindset will stay with them and help keep them out of debt when they're older."
11- to 15-years-old: Pre-paid Present
If post-party plans include the mall or the movies, your tween might prefer to receive birthday cash. If so, consider introducing your child to a pre-paid spending card, which is a re-loadable spending card that can be used anywhere major credit cards are accepted. Many cards can be funded starting with just $10 and can be replenished online throughout the year.
"Your child gets the gift of more financial freedom while learning at an early age to manage money responsibly," says Walbert. "And using a pre-paid spending card is safer and more convenient than carrying around a pocketful of cash."
16-20 Years: Must-Have Mutual Funds
In place of yet another gift certificate, think about using those funds to invest in the future. Parents can open some no-load mutual fund accounts in their names and their teen's name for as little as $20, with a $20 per month contribution. Look for investment accounts specifically designed for teens, with the funds invested in companies they are likely to know.
Walbert notes that "learning about the importance of long-term investing can have a big impact at an early age. And getting your child in the habit of making regular investments each month can have huge benefits for their financial future."
From birth to bachelor's degree, the power of financial know-how will be one gift your children never outgrow. Visit usaa.com for more information.
USAA Financial Planning ServicesSM refers to financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California), a registered investment adviser and insurance agency and its wholly owned subsidiary, USAA Financial Advisors, Inc., a registered broker dealer.USAA means United Services Automobile Association.