5 Holiday Gifts to Teach Children About Money

While parents do their best to provide their kids with memorable holiday gifts, all too often those presents wind up sitting around the house creating clutter. Or they end up in landfills—the fate of 4% of gifts given in 2019.¹ Instead of spending money on toys the kids don't need, try giving fewer but more meaningful presents this year.

One of the most meaningful things a parent can do is instill financial literacy concepts into their children. Kids who get "money lessons" early have a head start when it comes to making sound money decisions in adulthood.² The holiday season offers an excellent opportunity to teach children about money with gifts that make finance fun.

1. Money Games, Books and Flash Cards

Counting games, money flash cards and board games introduce age-appropriate financial concepts in approachable ways.

Money flash cards or play money reinforce counting skills for younger children. When kids can hold bills in their hands, money feels concrete rather than abstract.

Classic board games like Pay Day, The Game of Life and Monopoly also reinforce counting skills in younger children. And they provide older children with hands-on budgeting experience in the form of a fun game.

Sherman Standberry, licensed CPA and managing partner of My CPA Coach, says these board games "can introduce concepts such as income, expenses, taxes and investing in a fun and engaging way. These games mimic real-world financial scenarios and help children understand the impact of their financial decisions."

2. High Yield Savings Account

Does your child get envelopes of cash from relatives during the holiday season? If so, it may be time to open a high yield savings account for them. The Consumer Financial Protection Bureau recommends parents open savings accounts for their children as soon as they have more cash on hand than parents feel comfortable with.³

While minors in some states are allowed to open their own bank accounts, a custodial or joint setup can work well. In a custodial account, a parent or guardian manages the account money on behalf of the minor child. This way, children can't withdraw from the savings account without custodial approval.⁴

A good option is to look for a kids' savings account that has minimal fees or balance restrictions since their deposits will likely be limited to gifts and allowance money. 

3. Savings Bonds

Because savings bonds earn interest for a 30-year period, they're great gifts for little kids, who may be able to use that money for college tuition or a down payment on a house.

These days, most savings bonds are purchased electronically through the government website TreasuryDirect. Both the giver and recipient must have a TreasuryDirect account; children under 18 must have their account linked to an adult custodian's account.⁵

Savings bonds come in two types:

• EE bonds earn interest for a 30-year period. TreasuryDirect guarantees these bonds will double in value in 20 years, and they'll even top off the valuation if need be! EE bonds earn a fixed interest rate for the duration of the 30-year period.⁶
•  I bonds earn interest for 30 years, too. They earn a fixed interest rate like EE bonds. However, they also earn a fluctuating interest rate, which changes twice a year. I bonds earn interest every month and the interest is compounded, or added to the principal value, twice a year. Each time the interest is added on, the bond grows in value and earns even more interest.⁷

4. Roth IRA

Do you have a minor child who is working and earning income? If so, they're eligible for a very special gift: a Roth IRA.

Roth IRAs are not tax-advantaged, meaning contributions don't lower taxable income. But these accounts have a special benefit: Roth IRA money is taxed at the time of deposit and grows tax-free. This means your child won't owe taxes when they withdraw money later in life.⁸

Let's break down the advantages of opening a Roth IRA for a child. Say you put a one-time deposit of $1,000 into a Roth IRA for a 15-year-old and the money grows until they reach age 65 (a 50-year time period). Assuming an average rate of return of 6% per year, your one-time $1,000 gift would grow to $18,420.15!

Use an online interest calculator to model the growth of a portfolio over time to your child and perhaps kick-start an interest in investing.

“Many parents try to teach kids about saving first and perhaps bring in investing later," says Robert R. Johnson, PhD, CFA, CAIA, professor at Heider College of Business, Creighton University. “While both can be done concurrently, I believe that investing is a much more interesting and compelling topic, one that can capture the interest of kids."

Money put into a Roth IRA—but not investment earnings—can be withdrawn penalty-free to pay for necessary expenses, such as a car or a home.

5. Collectibles

Collectible gifts connect your child's hobbies and interests to the idea of money in a playful and potentially lucrative way.

Consider this year's megahit “Barbie" movie. Not only was “Barbie" one of the top-grossing films of all time,⁹ but it also kicked off an eBay collectibles craze. From 2021 to 2022, Barbie Signature doll sales on eBay increased 900% from movie buzz alone.¹⁰ Offline, shoppers are trawling collectibles stores looking for rare Barbies.¹⁰

Trends come and go, and collectibles aren't guaranteed to appreciate in value. However, you never know when a child's niche interest could wind up in the limelight the way vintage Barbie dolls have this year.

Teach Your Kids Good Money Habits This Holiday Season

This holiday season, don't miss the opportunity to teach your kids good money habits with an age-appropriate financial gift. Many gifts, including EE and I series savings bonds and a Synchrony Bank high yield savings account, can be opened online in just a few minutes, meaning there's no need to fight the shopping mall crowds to finish your holiday shopping list!

READ MORE: 4 Financial Literacy Games to Make Saving Fun for Your Family