Stumped on what to get the new baby? Eight gifting tips aimed at an adult life unburdened by college debt.
September is here, and that means there's a very good chance you'll be visiting a newborn and his/her proud parents. One need not have a crystal ball to make that prediction.
The Centers for Disease Control National Center for Health Statistics reports the month of August has the most births each year, with July coming in as a close second. The Centers for Disease Control data finds that of the 3.9 million babies delivered in the United States every year, a little more than 702,000 are welcomed to this world in July and August.
And once the new family gets settled in, the gifting cavalcade begins. While strollers, diapers, stuffed animals and the latest Baby Einstein gadgets are great, the gifts with the most lasting impact are the ones that baby won't play with or value until adulthood.
If you're interested in making a difference in a child's life, there's no better gift than a financial one, stashed securely away as part of a child's financial plan taking him into college and beyond.
Here are a few tips to set up your child, grandchild, niece or nephew with the financial foundation that puts her future on firm footing.
1. Help that child become a debt-free adult. Start them on a path of saving for college.
2. Is it a coincidence that September is also National College Savings Month! Set up a tax-free 529 Plan, available in Illinois and most states.
3. Imagine getting a $1,000 gift that may earn interest at the rate of up to seven percent every year and will never be taxed. By the time that newborn is 18 years old, the $1,000 investment could grow to approximately $3,400.
4. Plans' minimal deposits range from $15 to $1,000 and can be linked to a checking or savings account so you can automatically contribute throughout the child's life.
5. Contributions of up to $14,000 per year or less are gift-tax free.
6. Under special rules unique to 529 plans, you can gift a lump sum of up to $70,000 and avoid the federal gift tax, provided you elect to spread the gift evenly over five years.
7. When opening an account, set it up in your own name (along with a successor owner, in the event of death or incapacity), and name the child as the beneficiary. This ensures you have control of the funds until you're ready to release them when the child is no longer a minor.
8. 529 plans provide you with the flexibility to change the name to another beneficiary, without any tax penalties. So when that baby grows up and wins a full-ride scholarship, you can pass along the money in the 529 college savings plan to her sibling.
Making gift contributions through a 529 plan is easy and puts your newborn loved one on a secure savings path for years to come. To learn more about this and other investments, contact us at info@HedekerWealth.com.
Dean Hedeker is owner and principal of Hedeker Wealth (http://www.hedekerwealth.com) in Lincolnshire. He has more than 30 years of experience in estate and financial planning and wealth management. He is an Attorney at Law and Certified Public Accountant, and he can be reached at info@hedekerwealth.com.