4 Ways You Can Gift Money to Children

When it comes to shopping for children in your life, it may be hard to find the perfect gift. But some of the best gifts for kids are not wrapped in shiny paper and bows.

Helping your younger loved ones financially is one gift that will always fit. Here are four ways you can make a difference for a grandchild, niece, nephew, or any other child in your life.

Money in a 529 college savings plan grows tax-deferred, and distributions are tax-free when used for qualified educational expenses. The money can be used for tuition and fees; room and board; books, supplies, and equipment required for enrollment or attendance; and computer and technology needs at nearly any college across the country.

For college savings plans managed by T. Rowe Price (T. Rowe Price College Savings Plan, Maryland College Investment Plan, and Alaska 529), you can conveniently gift online with the GoTuition^® gifting portal by asking the account holder to send you a link to the gift recipient’s profile. The gift-giving process is simple and easy to follow. Log in to your account for access to the GoTuition^® gifting portal.

There are advantages to giving to the institution directly versus gifting to a child. The benefit of paying the school directly is that the amount doesn’t count toward the annual gift tax exclusion limit, and there is no restriction on how much you can pay. Keep in mind that payments can only be made for tuition.

If the child has any earned income from a summer, part-time, or full-time job, he or she can open a Roth IRA, or you may be able to fund a custodial (minor) Roth IRA. A Roth IRA provides future growth opportunity and flexibility. While there is no tax break upfront, a Roth IRA provides tax-free income in retirement. Contributions can be taken out tax-free at any time. And withdrawal of earnings can be made penalty-free in some circumstances prior to age 59½.*

Want to go the extra mile? Offer to match each dollar that the child contributes to a Roth IRA (up to the IRS limit). Or you can simply fund the account in total up to the allowable amount. That way, the child can experience the value of saving for a financial goal without contributing a sizable portion of what was earned. It’s a terrific opportunity to teach important lessons with money and the value of saving toward a goal.

Here are a few additional things to keep in mind with Roth IRAs:

These accounts allow you to gift and transfer any amount of money, securities, and even property to a minor. While the funds in UGMAs and UTMAs can be used for any purpose later in the child’s life, it’s important to note that:

If you’re considering any of these ideas, be sure to do your own research to fully understand the pros and cons of each option. Make sure to consult with your financial institution, advisor, or tax expert before taking any next steps. There are many ways to give to the children in our lives. Why not consider a gift that could provide returns for a lifetime?

Please note that a 529 plan’s disclosure document includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. You should compare these plans with any 529 college savings plans offered by your home state or your beneficiary’s home state. Before investing, consider any tax or other state benefits, such as financial aid, scholarship funds, and protection from creditors that are only available for investments in the home state’s plan. Tax benefits may be conditioned on meeting certain requirements, such as residency, purpose for or timing of distributions, or other factors, as applicable.