Nancy: … And one category to consider including on your list is something that can impact the financial future of your family and our money expert, Kurt Pearson, is here with us this morning. And Kurt, what do you recommend as the best sort of financial gift for folks?
Kurt: Well, kind of tweaking the whole idea of giving cash on Christmas would be to make a potential investment into a family member’s account on their behalf. Two of the more popular accounts to consider would be of course the 529 Account where a grandparent or parent actually own the account, the child would the beneficiary, and the money is kind of targeted for post-secondary education, so the college fund.
Another type of account would be the Roth IRA where perhaps you have an adult child that has earned income – that’s an important point – and you can make a contribution. That money is kind of tied up until their retirement age. So a couple of good ideas, and you can do very reasonable amounts into those types of an account so it’s not a financial burden on the giver.
Leo: You mentioned the Roth IRA, now, what are the rules as far as when those can be withdrawn and when they can’t?
Kurt: Leo, there’s always a risk that an adult child – since they would be the owner of the Roth IRA – they could pull the money out as soon as it’s put in. There would be penalties perhaps and some tax concern to think about so that is an issue. But usually it gives them enough pause to think and they steer away from it.
Nancy: Any other suggestions for financial gifts?
Kurt: Well, yeah, there’s always the educational area and educational gifts come in two types of forms. First is the ability to learn something new about a financial technique or strategy, and then the second idea is to help people get organized, perhaps a software package or something like that. So that’s a great gift because education usually leads to strong confidence about financial decisions.
Leo: Essentially, gifts are kind of investments themselves.
Kurt: They really are, they really can be, yeah.
Nancy: Well Kurt, thank you so much for being here. And as always, if you have any questions that you would like Kurt to answer you can give him a call at Compass Financial, the number is 515-327-1020.