Graduation is a huge milestone for anyone, but especially for younger people who are looking forward to college, or their first job after crossing the stage. We all know well wishes are in order, but for family members or friends who want to give a special graduation gift, what do you do? Cash is always an option, but there are several other creative financial options that could help to start your graduate on a path to financial wellbeing. Below are 7 of these options for you to consider when gifting to your graduate!

 

Make an IRA contribution

An IRA is a great way to help ensure that your graduate begins planning for their retirement years, even though it may seem so far away. If your graduate is under 18 or 21, (depending on the state you live in) you can open a custodial IRA account and directly manage it and contribute to it until they are old enough for the account to be transferred to their name.

 

Contribute to a 529

Lots of times, family members will set up 529 plans for students to help with the costs of college. A nice feature of these tax-advantaged accounts is that they accept third-party contributions, regardless of who owns the account. This means anyone can help a student save for, or continue college. If you are gifting to a 529 as a graduation gift, it will qualify for the annual federal gift tax exclusion, meaning you won’t face any gift tax consequences as long as you stay under this year’s $18,000 limit.

 

Pick up a student loan payment

The cost of college continues to be on the rise, and many students rely on loans to pay for their education. In addition, this past year an increased number of students have missed out on scholarships and grants due to issues with FAFSA. Gifting your graduate with money to specifically go toward a student loan could help to lessen the burden of these payments. The student should make it known to the lender that the extra payment should be designated as an extra payment of principal, not an early payment of the next installment.

 

Give stock or other assets

If you own any stock or mutual funds, you know how important they can be to your financial planning. Passing stock onto graduates can be both a great lesson, as well as a way to help set them up financially. Your broker can assist with this, either by transferring assets or buying new mutual funds or exchange-traded funds.

 

Buy them a C.D. or a savings bond

This option is similar to gifting cash. However, the way a certificate of deposit (C.D.) and a savings bond are set up make them harder to spend lightheartedly. These are long term investment tools that actually lose some of their value if they are cashed in early, and your graduate will have to wait a period of time before they have access to the money from these.

 

Cover any moving expenses

If your graduate has landed a dream job of theirs that requires a relocation, helping to cover their moving costs can go a long way. Depending on the distance, this could be a substantial amount. However, as mentioned above, since this can count as a gift, the gift tax exclusion applies.

 

Help the grad learn to budget

While not a monetary gift for your graduate, learning how to budget will help them in several ways over the course of their lives. There are many ways to budget, but the most popular and appealing method to younger people are budgeting apps. Talking with your graduate about how to use a budgeting method will set them up for when they are more independent in college, and for when they begin earning more money with their first full time position.

 

TFG Financial Advisors, LLC, is registered as an investment adviser with the SEC. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The firm is not engaged in the practice of law or accounting. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a professional advisor before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Tax rules and regulations are subject to change at any time. All investment strategies have the potential for profit or loss.