Last week we celebrated my son Corey’s Bar Mitzvah at Temple Emanuel in Andover – our last one. On Sunday afternoon, my wife, Laura and I put our feet up, opened a bottle of the good stuff, and toasted the success of all five of our children. Next up, we thought, weddings. Oy!
Yet in the interim falls a time when life remains expensive… still. Between Jewish adulthood and matrimony comes the price of education. Whether your child or grandchild is a newborn, or soon to be college graduate, preparing for the cost of college is a necessary evil and one that can’t be overlooked.
Here’s a letter I received from a reader:
I have a beautiful grand-daughter who will be Bat Mitzvah’ed next month. I’d show you her picture, but I can’t figure out how to send it through my flip-phone. She has such a shayna-punim. Rather than hand her a check, I was trying to think of a unique gift for her Bat Mitzvah. Any ideas?
– K’velling, Boxford
Dear K’velling –
While many grandparents elect to give a traditional cash gift that is a multiple of Chai (18), I’m seeing more and more people present more meaningful gifts.
Establish a 529 Plan
This is probably the most popular investment tool used to help parents/grandparents invest for the future. The account is established in the Donor’s name (the person writing the check). It then names your child/grandchild, etc. as beneficiary. Your investment grows federal and state tax-free and its generally invested in a collection of mutual funds. When it’s time for the child to attend college, dollars are withdrawn free of taxes as long as the money is used to cover college expenses (and that definition is quite broad).
What happens if the child doesn’t elect to attend college? No worries. As the donor you can shift the money from one beneficiary to another with relative ease.
In Massachusetts the 529 program is offered through Fidelity fideilty.com/529-plans.com, but don’t feel like you have to choose the in-state option. There are plenty of other choices for your 529 money. Want to see them all? Visit savingforcollege.com. Many 529 companies offer a “Gift Card” that indicates “an investment in your future has been made.”
Consider a UGMA (Uniform Gift to Minors Account)
For decades this was the popular savings strategy for kids. It became the account for birthday money, allowances, Bar Mitzvah checks and more. In a UGMA the money deposited is deemed a “gift” that can only be used for that child’s benefit. In fact, the child’s social security number is primary on the account. Mom (or another adult) serves as “custodian.” Unlike the 529 plan, where money MUST be used for college expenses, money in a UGMA account can be used for the child’s “Health Maintenance and Support.” I oftentimes see money withdrawn for bicycles, computers, private school and more. For many, this account has grown out of favor. First, once the child reaches the age of majority (21), any money in the UGMA account is theirs. The custodian no longer has legal control over the money. Second, money in an UGMA is considered the child’s assets, and can have an impact on financial aid eligibility.
**A Share of Stock **
I’m not a huge fan of individual stock ownership. I much prefer investors selecting mutual funds or exchange-traded funds for their portfolios. Yet, GiveAShare (www.giveashare.com) allows you to purchase a single share of stock and have it registered for the child’s benefit. Imagine handing a graduate a share of Disney, Starbucks, or Apple stock. The framed certificate is usually a replica, so you needn’t worry about the child losing it. The actual single share is held electronically.
The Gift of Stories
Consider sitting in front of a video camera and K’velling about how proud you are of your grandchild. Tell stories about “When I was your age,” or “These are my dreams for you,” or “the greatest lessons I learned in life is…” She’ll surely cherish these stories as she grows and she’ll also be able to share them with children of her own.
Marc Freedman CFP®, is President/CEO of Freedman Financial, Peabody.