Top 6 Financial Gifts for a Happy, Prosperous, Holiday Season

From cash to college savings to cows, check out these financial feel-good gifts

While it may be better to give than receive, advisors and their more careful clients can’t help but feeling cautiously prudent at holiday time. Why, they ask—at the risk of sounding Grinch-like—why buy a bunch of stuff that’ll just collect dust?

Why indeed? During the 2010 economic recovery, as American consumers have learned to appreciate the joys of saving almost as much shopping, many are hanging their stockings by the chimney with care in hopes that solvency soon will be there.

This is a happy turn of events for financial gift-givers, who can feel confident this year that their profitable presents will be appreciated.

“By simply expecting less of ourselves—and teaching our families to accept those limitations—not only are we teaching them valuable lessons about how to manage money, but we are also reducing the stress of the season so everyone can enjoy themselves,” says Lou Scatigna, president of AFM Investments in Howell, N.J., and author of The Financial Physician. “Because, at the end of the day, holiday presents are just things. The time we spend with our families during the holidays is the true gift of the season.”

That said, a thoughtfully selected gift that helps ease a loved one’s or a charity’s financial burden can’t go amiss. Here are the six best financial feel-good gifts to give this holiday season:

1) Cash. Yes, that’s right, cash. While it may be considered rude to ask for cash as a present, it’s not rude to give it. In fact, when offered in a festive card with a fancy envelope, cash can make both a beautiful and a hugely useful present.

Note: According to the Internal Revenue Service, gifts are not taxable if they are made to your spouse or if they pay for someone’s tuition or medical expenses. In addition, gifts of up to $13,000 after Jan. 1, 2009, are excluded from taxation.

2) Gift Cards or Certificates. The downside to gift cards and certificates is that they’re not as easy to spend as cash, and they’re usually redeemable for just a single merchant’s goods or services. The upside is that they feel more like a special holiday present.

For the best of both worlds, a good way to go is buying a “SuperCertificate” from GiftCertificates.com.  It doesn’t have an expiration date and can be exchanged at GiftCertificates.com for original gift certificates from hundreds of stores, airlines, hotels, theaters and restaurants.

3) Assets. While wrapping a big red bow around this present may not be possible, the gift of assets to a grandchild, niece or favorite charity is a powerful one.  As with cash gifts, the IRS allows for asset gifts of up to $13,000 to one person or other donee. Spouses who give an asset together are each entitled to the annual exclusion amount on the gift, totaling a maximum of $26,000 after January 1, 2009. An estate-planning advisor, accountant or lawyer should be consulted by gift-givers who want to give assets.

“We always encourage our clients if they’re able to engage in a planned gift-giving strategy,” says Tom Astore, tax director for accounting firm Rodman and Rodman in Newton, Mass. “In certain circumstances, a husband and wife may want to increase their gifts up to their federally mandated gift tax exemption, which is currently $1 million, to transfer future growth assets out of their estate.”

4) Securities. Stocks, bonds and mutual fund shares are a great stocking stuffer at holiday time—even for children. Kids who have just started to learn about saving money can do more than put their pennies in a piggybank.

Now, accounts such as ING Direct’s Sharebuilder.com let young investors buy stocks for as little as $4 with automatic investing. And OneShare’s start-up kit includes a stock certificate in companies such as Disney or Nintendo that comes with a personalized gift card, reference guide and owner’s manual.

5) 529 College Savings Plans. For parents and grandparents who want to contribute to a young adult’s higher education, 529 college plans allow their owners to direct tax-free funds toward college expenses, says Jeff Coghan, director of 529 plans at The Hartford, which runs a state plan in Connecticut as well as a national plan. Contributions to 529s are bound by the IRS’s gift tax limits.

“Grandparents overwhelmingly want to help their grandkids go to college, but obviously, the kids’ eyes don’t light up when they get college savings,” Coghan says. “We suggest pairing a gift around a college savings plan. For example, if the student is interested in art, we suggest art supplies along with information about the 529 contribution.”

6) Financial Advice. Last but certainly not least, savvy investors may want to consider buying a few hours of time with their trusted financial advisor for a loved one.

“I think financial advice is an excellent gift,” says Donald W. Nicholson, founder of Donald W. Nicholson & Associates, a fee-only financial advisor in Wilmington, Del. “People give out Starbucks cards, so it would be an excellent idea for someone to go in for a few hours of time with an advisor. It’s a different Yuletide gift, but the value is there.”

Nicholson suggests that since many fee-only advisors already give one hour of free time when meeting potential clients, existing clients in a gift-giving mood can work out a deal with their advisor for a few hours of time with a child or other family member.

Financial advisors and their clients looking for other spectacular gift ideas may want to encourage their nearest and dearest to do some estate planning, says Susan John, president of the National Association of Personal Financial Advisor.

"I gave my stepkids wills," John says. "I gave them a questionnaire and set up an appointment with my attorney. It's the sort of thing that makes you take action, and if they don't go, it doesn't cost me anything. I did it on Thanksgiving so they'll do it by the end of the year."

Bonus Gift. For the person who has everything, giving a charitable donation in their name may be the best gift of all. For example, Heifer International can buy a dairy cow in your special someone’s name—a cow that produces up to four gallons of milk a day to nourish a needy family. For other ideas, go to www.redefinechristmas.org or www.justgive.org.

Read 10 Great Holiday Gift Ideas to Thank Clientsat AdvisorOne.com.

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