Ask Kim

Kiplinger

Smart Financial Gifts for New Grads

Kiplinger.com
[QUESTION]My granddaughter is graduating from college, and I want to give her a generous gift that helps her build her financial future. Any ideas? --D.L., San Francisco

[ANSWER]One suggestion is to give your granddaughter money to contribute to a Roth IRA. She can stash up to $5,500 a year in a Roth as long as she earns that much from a job, and the money she actually uses to fund the account can be a gift. Starting her on the savings habit early can make a huge difference in her future, says Mari Adam, a certified financial planner in Boca Raton, Fla., who is helping her adult children fund their Roths. If your granddaughter contributes $5,500 every year to a Roth starting at 22, then bumps up annual contributions to $6,500 at age 50, when she becomes eligible for catch-up contributions, then she'll have $1.5 million in tax-free money by age 65 (assuming a return of 7% per year). She can withdraw contributions without taxes or penalties at any time if she needs the money for, say, a house down payment. All withdrawals, including earnings, are tax-free after age 59½. You can open a no-fee Roth at Schwab, TD Ameritrade or Fidelity.

SEE ALSO: 10 Financial Commandments for Your 20s

Other ideas: Some grandparents (and parents) pay off a chunk of student loans. Or you could give her a "professional-start package," says Adam--a lump sum she can use to cover a professional wardrobe, travel costs for job interviews or a car.

EDITOR'S PICKS

Copyright 2017 The Kiplinger Washington Editors

More from Kiplinger.com

See more stories in this category

Back to Previous Page

Ask Kim

Protect Yourself From Identity Theft When...

[QUESTION]Do I need to let my bank and credit card company know before I leave for vacation? What else...

Your Tree, Your Neighbor's Property: Whose...

[QUESTION]What happens if my tree falls onto my neighbor's property? Does my insurance pay, or does...

How Kids Can Start Investing

[QUESTION]I am 16, and I'd like to start investing in stocks. I don't have any income, but my parents...

The Advantages of a Tax-Free Transfer From an...

[QUESTION]I'm 70 ½ and need to start taking required minimum distributions from my retirement...

How to Maximize the Home-Office Tax Deduction

[QUESTION]I'm mostly retired, but I earn some money as a self-employed consultant. I use an extra...

Next Page >
Provided by Kiplinger