Let’s face it, creative gift giving is difficult. It is easy to be discouraged by the fact that the cost of a gift to the giver rarely equals the value to the receiver. In economics, this difference is called the deadweight loss. With the average person expecting to give $812 in gifts this Christmas, the deadweight loss is estimated at 20% the cost or about $162 per person.
That being said, there is a powerful side of gift giving which is sacred and where the cost does not matter. A Christmas celebration need not impoverish us and our use of money can be an expression of love, justice and mercy.
In short, our gift giving at Christmas time can encourage financial responsibility instead of being an expression of financial irresponsibility. Here are a few financial Christmas gift ideas to help you this holiday season:
529 College Savings
Give children a 529 college savings account. We’ve found that this gift is a favorite for grandparents to give to their grandchildren. This generous gift helps parents fund their children’s education and helps grandchildren graduate from college debt free. It both shows a deep sacrificing love as well as supporting the values of education and vocation. Plus, you can fund the account every year.
Investing requires experience over many years to understand how the markets work. To encourage investing from a young age, parents can gift a small portfolio to their children and allow the kids make a few decisions there. You can offer to purchase shares of individual companies such as Disney or Mattel so when they purchase their favorite toys they can know they are supporting their own company. Or you can offer them indexes such as small cap value or emerging markets. A Monkey throwing darts often outperforms the investment experts simply because they randomly pick unknown small cap stocks, so your children shouldn’t lose you too much money. The value to their education might well be worth risking several thousand dollars in an account that they can follow and direct.
Kiva Gift Card
Another options for young kids is giving them money for microfinance loans at Kiva. This not only encourages generosity with their finances, but entrepreneurial values. With as little as $25, you can begin loaning money to developing world entrepreneurs. And you can give that money as a gift certificate.
Roth IRA Funding
For young people aged 14-30, you can also help them fund his or her Roth IRA each year. Young people need experience saving and investing. There is no better way to encourage that than to help fund it. You can start encouraging it by giving them the money to fund their Roth IRA for as much as they earn up to the $5,500 limit. This allows a teenager to both fund their Roth IRA to the full extent of their earning and also have their earnings for spending money. You should see “How to Open a Roth for Your Child” for more information on this.
As a young person becomes more financially responsible, you can gradually reduce your contribution from 100% of the funding to 50% where you match every dollar they contribute to 25% where you match every three dollars they contribute.
For those aged 20-40 exploring different vocations, I recommend Barbara Sher’s book “I Could Do Anything If I Only Knew What It Was.” This book helps people discover what they really want and how to get it. All of her books are helpful for vocational planning, but this one is our favorite.
Last year, we recommended Ken Elzinga’s economic murder mystery, “The Mystery Of The Invisible Hand.” In addition to his three other Henry Spearman mysteries, Ken also recommended several of his favorite economic books in his interview with Marotta On Money. To his wonderful list I would add F. A. Hayek’s classic “The Road to Serfdom” or anything by Thomas Sowell.
For recipients between age 50 and 60, I recommend books which deal with the non-financial side of retirement such as Mitch Anthony’s “The New Retirementality.” Retirement was easy when people retired at age 65 and were dead by age 72. Now couples are living well into their 90s and should plan carefully how they want to live the next 30 years of their lives. Another good book on this subject is Marc Freedman’s book, “Encore: Finding Work that Matters in the Second Half of Life.”
Budget and Debt Strategies
Many families struggle living within their budget and getting and staying debt free. The skills which must be learned are instinctual not intellectual. The best resource we have found is Dave Ramsay’s Financial Peace University. The cost is about $100 and you can find a class in your area or attend classes online.
The class teaches how to run a family’s finances to reach your goals in a winsome and accepting environment. You don’t have to be in debt to benefit from the material, but you do have to want to attend. I suggest offering to pay half of the costs if a couple wants to attend. Paying the other half provides enough motivation to keep them going back to get the full value.
Financial Christmas gifts don’t need to be a piggy bank. They can be more serious and more meaningful than that.
Photo credits are found as links on the images. Featured image used here under Flickr Creative Commons.