Toys and games can be fun gifts for kids, but your child can outgrow these. Eventually, they’ll leave the house, and you’ll have a lot of unused toys. So, why not get your children more practical and long-lasting gifts as well? Financial literacy and wealth are gifts that can last for a lifetime, and there are many ways to impart these to your child while they’re young. With that in mind, this article will dive into five birthday gifts for kids that are more practical than toys.
1. Life insurance for children
Life insurance for children pays out a death benefit if your child passes away while the policy is in force. This payout is a safety net that helps you cover funeral expenses and related costs, so you won’t have to worry about finances while grieving.
Purchasing a policy for your child can provide protection and peace of mind in case the worst should happen. Additionally, it may also be possible for your child to take over the policy when they are an adult. There are several types of affordable life insurance options for children, including term and permanent insurance. Compare life insurance quotes online to find a policy that meets your coverage needs and budget.
2. 529 account contributions
529 accounts are state-run education investment accounts that offer tax advantages so you can save more money for your child’s future college education. Contributions are not pre-tax. However, they are invested and grow tax-deferred. You can withdraw the money tax-free if you use the funds on qualifying educational expenses, such as tuition and fees.
3. Joint bank accounts
Children can’t open bank accounts on their own, but you can open a joint account with them. This puts you and your child’s name on the account, giving each of you equal control. You can open joint checking and savings accounts. Joint checking accounts typically don’t earn interest, but issue debit cards to you and your child and have unlimited withdrawals. This helps them learn how to spend their money wisely and live within their means.
Joint savings accounts limit withdrawals to six per month and have no debit card but pay interest. These accounts help teach your child to set aside some of the money they earn and build up their savings over time. Once your child gets a job, they can direct deposit their paychecks into these accounts to continue building their finances.
4. Custodial investment account
Custodial investment accounts are another great way to help your child build wealth and learn personal finance early. These accounts make your child the beneficiary of the investment, but you adm inister the account, meaning that you are the final say in choosing investments.
These accounts help you start your child on the right foot financially by growing their investments early in life. At the same time, they offer you the opportunity to teach your child the basics of investing and the markets so that they feel more confident when they reach adulthood. Once your child has reached the age of majority, you can turn the account over to them. They will then be allowed to manage their own investments.
5. Credit card
Children can’t get their own cards until they’re 18. However, you can make them an authorized user on your credit card so that they get their own card and establish a credit history. This card is attached to your account, so your child’s spending and cashback will show up on your account.
Authorized users usually build credit. That means your child can start building credit early, making it easier for them to buy a home, purchase a vehicle, and qualify for better credit cards later on. Being an authorized user also gives you an opportunity to teach your child smart credit card usage. For example, you can sit down once a month with your child and review their spending as an authorized user. Then, you can have them pay you for any purchases they made.
The bottom line
You don’t have to give up toys and games as gifts entirely. But consider swapping out some of those for the more long-lasting gifts of financial knowledge and wealth.
Getting life insurance for your child can help your family remain financially secure while you grieve if a child passes away. It can also be transferred to your child when they are an adult. Affordable options to consider include term insurance.
Financial accounts also make excellent practical gifts for your child’s future. 529 plans help you set aside more for their education. Your child can contribute, but you’ll likely be the main contributor.
However, joint bank accounts and custodial investment accounts give your child more control over money. Ultimately, you, as the parent, make the final decisions regarding these accounts and investments. But they can help your child learn how to manage their accounts and grow their wealth early. Finally, making your child an authorized user on your credit card helps them build credit early in life and learn how to use their card wisely.