Five ways to give your kids a financial head start this holiday season

We’re fast entering the season of giving, with the year-end calendar crammed with one holiday after another. But in an uncertain economy, it’s important to get your giving right.

That means avoiding the usual waste, like plastic toys that will get ignored or broken or discarded within days. In fact, last year Americans spent more than $10 billion on unwanted gifts, according to a survey by Finder. 

Instead, think about a gift with a more durable future: Something with the potential to grow, to be used for an important life goal down the line, and to teach valuable lessons along the way.

In other words, money.

Not the most sentimental of gifts, sure. But if you can use the holidays to teach teens about how to handle money – saving, spending, budgeting, investing – you are equipping them with skills they will be able to use for the rest of their lives.

To really impart some financial lessons, it’s going to need to be more than a throwaway gesture like $20 from Grandma’s purse. So what’s the best way to pass along lasting money smarts? A few ideas:

-Open their first accounts. If they don’t have accounts already, this kind of basic financial infrastructure is where you need to start. Ideally you’re looking for a spending account that won’t sock them with charges – so seek out those with no annual fees, no overdraft fees, no minimum balance requirements, and an extensive ATM network such as Current. Since most young adults don’t have much of a credit record yet, look for an account that also has a credit building feature, such as Current’s Build Card. Members have an average credit score increase of 81 points after six months of using the Build Card.*

-Youth IRAs. You might not realize it, but it is possible for young adults to open a Roth IRA. Getting an early jump on saving might not seem like a big deal now, but fast forward to their own retirement years, and the difference could mean hundreds of thousands of dollars.

“I often recommend using a Roth IRA to teach teenagers the process of saving,” says Brian Cody of Cody Financial Advisors in Gillette, N.J. “The teens can spend some of what they earn over the summer, while the parents match those earnings with a Roth IRA contribution. It’s one of the most effective ways I’ve seen to get young people excited about working, saving, and developing lifelong financial habits.”

The rule here is to open such an account, they have to have some earned income: That could be from part-time or summer work that issues them W-2s or 1099s, or it could be from more informal arrangements, like babysitting or mowing lawns (keep records in case the IRS wants it).

-College savings. The holidays are an ideal time to top up kids’ 529 plans – not just for parents, but grandparents as well. According to the College Board, average annual tuition for 4-year public in-state colleges is now $11,950; out-of-state rises to $31,880; and private to $45,000. So you want to start as early as possible (think: delivery room) so that money has sufficient time to grow from investment.

The added bonus for relatives is the state tax break, which often can be quite substantial. For New York State, for example, you can erase up to $10,000 from your taxable income for a married couple filing jointly. (Research your own state here.)

-Regular savings. Admittedly, retirement may be a far-off goal that teens have a hard time wrapping their minds around. But here’s something that’s a little more immediate for them: A savings account for nearer-term goals.

That might be for a down payment on their first car, or to move out into their own rental apartment (which often requires an up-front lump sum for the first month, last month, and security deposit). With holiday contributions from them as well as relatives, and then juiced by interest from a high-yielding account, those goals of independence can start looking a lot more realistic. With Current, members can earn up to a 4.00% bonus on money in their Savings Pods.** 

-Charitable giving. The holiday season isn’t just about getting, it’s about giving. In fact, it’s the time of year when many families make contributions to the causes that matter most to them – not just to help others, but to lock in the tax deduction by the end of the tax year.

Involving young adults in those discussions can be an ideal way to get the focus off themselves, and to start them thinking about how to deploy money to create the most impact in their community. “Don’t forget the power of giving back,” says Jamie Bosse, a financial planner with CGN Advisors in Manhattan, Kansas. “Do something charitable together this season, to show them what generosity looks like in action.”

*Based on Build Card users, as of December 2024, who opted in to Credit Score Insights and have remained active for at least six months. Scores are calculated based on the TransUnion® VantageScore® 3.0 model, which is one of many credit scoring models and may not be the same model your lender uses. Credit scores depend on various factors, including your payment history, delinquencies, credit utilization, length of credit history, types of credit, total number of accounts, inquiries, and other financial activities. Individual results may vary, and a credit score increase is not guaranteed.

**Boost Bonuses are credited to your Savings Pods within 48 hours of enabling the Boost feature and on a daily basis thereafter, provided that the Savings Pod has accrued a Boost Bonus of at least $0.01. No minimum balance required. The Boost rate on Savings Pods is variable and may change at any time. The disclosed rate is effective as of August 1, 2023. Must have $0.01 in Savings Pods to earn a Boost rate of either 0.25% or 4.00% annually on the portion of balances up to $2000 per Savings Pod, up to $6000 total. The remaining balance earns 0.00%. To earn a Boost rate of 4.00%, you must receive at least one Eligible Payroll Deposit equalling a minimum of $200 over a 35-day period. For more information, please refer to Current Boost Terms and Conditions.