Black Friday's combination of hype and consumerism kept me home on the day after Thanksgiving. But the reality for me and millions of other Americans is that this is the season of gift buying for friends and family, and quite often we struggle to come up with ideas.
With that reality in mind, let me offer some suggestions for money-minded gifts that might be appropriate for a young person or a newly married couple.
I know that gifts meant to instill a measure of financial responsibility do not stir the same excitement as a new iPod or laptop computer. But for the right person, these are gifts that can keep on giving in the form of plush portfolios and dwindling debt.
In no particular order, here are just a few gift ideas to consider in the weeks ahead:
1. Roth IRA: If you have a child now making money on their own, then consider setting up a Roth IRA in their name and funding it with an initial contribution. Then let decades of tax-free compounding go to work. The Roth IRA allows for tax-free withdrawals in retirement, and its advantages are greatest for the young.
The primary requirement to set up a Roth IRA is that the account owner must have earned income from a job that is reported to the IRS. This earned income can come from a part-time job or self-employment from things like babysitting or lawn mowing as long as it's reported.
The actual contributions do not necessarily need to come from those earnings; the money can be in the form of a gift from mom, dad or someone else. But the total contribution for a given cannot exceed the child's earnings for that year.
There is no minimum age to set up a Roth IRA, but if the person is less than 18, then it would need to be set up as a custodial account with an adult in charge until the child is legally considered an adult.
A minimum contribution often is required to establish an IRA, but it can be done with as little as $500 at some online brokers. For help on setting up the account, I'd contact one of the major online discount brokers.
Once the account is set up, get the child involved in making the investment decisions to both educate and inspire them.
2. Books: After a Roth IRA, the money-related gift that offers the highest potential rate of return is a book that teaches good personal finance habits early in life. The book that triggered my interest in personal finance shortly after I got married was "Making the Most of Your Money" by Newsweek columnist Jane Bryant Quinn.
It covers a wide spectrum of personal finance topics, from investing to borrowing to insurance. First published in 1991, the latest edition is scheduled for release a few days after Christmas, but can be preordered now.
Books with an investing focus that I'd consider giving to someone include "A Random Walk Down Wall Street" by Burton Malkiel, "Unconventional Success" by David Swensen and "Winning the Loser's Game" by Charles Ellis. Each of these books outlines the advantages of investing in low-cost index mutual funds and exchange traded funds.