Reflections

Graduation Gifts for Life Lessons

Give a ‘Grad a fish, they’ll eat for a day.  Teach them how to fish and they’ll eat forever.

grad

Graduation season is underway, and that means everywhere across the country, proud parents are preparing to celebrate their sons and daughters. Sure, you could give the graduate in your life another Target gift card stuffed inside a generic card, or you could aim higher by trying to slip in a life lesson along with that tangible reward.  Instead of cash, consider a way to give them a reward that also introduces financial or cultural literacy.

Read below for the best graduation gifts for your child or graduate you know that could empower them for the rest of their lives.

Starting a Roth IRA

A college graduate saddled with student loans or a low salary might not think about starting their own retirement account, no matter how much you talk about compound interest. So you can start an account for them. Gifting a Roth IRA to a child, is an outstanding way to introduce them to the concept of savings and investment.

Let them know you’re starting an account, as it will only be possible to create an account together with their signature. However, most brokerage firms allow you to send in checks and deposit money into someone else’s IRA – motivation enough for them to sign the application. You can only contribute what they earned in a year, up to the limit of $5,500.

Assuming your graduate learns to properly care for their Roth IRA and does not make unqualified withdrawals, over time can lead these accounts to become significant assets. After all, the law of compound interest demonstrates the simple fact that the benefit of when you start saving outweighs how much you save. Hopefully they can become devoted to the idea of letting their savings work for them during their earliest working years.

Gift Appreciated Stock

Instead of a standard cash gift, you can reward your child while helping yourself with a lower tax bill if you give your child stock that has appreciated. Otherwise, you’ll eventually have to pay long-term capital gains tax (15% to 23.9%, depending on your income) on any amount your investments have appreciated. Gifting appreciated stock is a better alternative than giving cash because it removes this future tax burden from your portfolio.

When you give appreciated stock to your child and they sell the security, capital gains tax is paid at their rate – which is likely lower than yours. Children who are working and not dependent on their parents will even pay zero tax if their income is below $37K. If you gift to a child who is still dependent on you, any portion of the gift over $2,100 will be taxed at your rate (this is also known as the kiddie tax). Your child can also choose to keep the stock if they don’t need the cash or only sell partial shares, a great way to introduce them to having an investment account of their own.

Professional Resume

Parents want the best for their children – a good job with a high salary and great benefits. Unless they have strong connections, they usually can’t influence if their children get hired. But they can give them a great resume.

Gift them a professional resume when they graduate college, so they have the best chance at landing a job and moving out of your basement.

You can hire someone through Fiverr or purchase a creative template through Etsy. Make sure your student has the requisite software needed to update the resume themselves, so they won’t have to hire someone every time they get a new gig.

Cook Book

It’s a typical scenario: broke college student lives on Ramen because they don’t know how to cook. If this describes your child, don’t despair. Every great cook had to start from somewhere. Here are the best cookbooks for novice chefs:

● Leanne Brown’s “Good and Cheap” was designed for those living on food stamps, but is perfect for the recent grad who wants to eat cheap and healthy.
● Mark Bittman’s “How to Cook Everything: The Basics” is a how-to encyclopedia that will show the best way to cook everything from vegetables to seafood.
● Alton Brown’s “I’m Just Here for the Food” is a masterpiece from a chef who explains why certain flavors work well together and how beginner chefs can develop their own recipes.

Happy graduation to the Class of 2017!

Perritt Capital Management, Inc. is the Registered Investment Advisor for Windgate Wealth Management accounts.  Windgate does not provide tax advice. Consult your professional tax advisor for questions concerning your personal tax or financial situation.

Data here is obtained from what are considered reliable sources; however, its accuracy, completeness, or reliability cannot be guaranteed.

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