With more than one million students graduating from college, MyBankTracker.com created a gift-giving list they’ll be throwing their caps in the air for, but also make good financial sense:
- Contribute to a starter emergency fund
College graduates are likely to be entering the real world with plenty of student loan debt as they start their careers and secure a source of income. An emergency fund can offer a small safety net in case anything doesn’t go as expected — it could keep them from racking up even more debt.
Tip: Steer your grad toward an online savings account; they tend to charge fewer fees and pay higher interest rates.
- Gift a CD ladder for long-term savings
Grads want to save for things like their first car. Setting them up with a CD ladder makes it easy for them to keep earning interest until they need to use the money. The longer the term, the higher the interest rate; after the maturity date, they can cash it out with interest earned.
Tip: Consider staying on as a joint accountholder to keep an eye on how the money is used.
- Kick-start a Roth IRA
Help start a Roth IRA for the grad’s future nest egg. Since these retirement accounts are funded with after-tax dollars, withdrawals are tax-free. Even if the college grad doesn’t max it out in the earlier years, you’re helping to build momentum for retirement savings.
Tip: If young graduates aren’t keen on managing a retirement portfolio yet, steer them towards a robo-advisor that can simplify the process.
- Gift individual stocks, mutual funds and bonds
Teach them how to invest by gifting individual stock shares or cash for mutual funds or bonds. Not only are you giving a gift, but you’re helping them build wealth. There are sites where you can choose individual shares or ones that allow you to purchase stocks and bonds to transfer directly into the grad’s online account.
Tip: If you give more than $15,000 to someone in a year, you need to file a gift tax return (IRS Form 709), but, that doesn’t necessarily mean you’ll owe any gift tax.
Here are Four Alternative College Graduation Financial Gifts Every 20-Something Needs.