If the three wise men arrived in Bethlehem today, would they
come bearing gifts -- or gift cards?
After all, somewhere in the last couple millennia, frankincense
and myrrh have fallen out of favor as presents. Gold is still
popular, but a little heavy to lug around. So, 21st-century
versions of the three wise men (which by now would surely include
at least one wise woman) might do what so many of their modern-day
peers do: fall back on gift cards.
Then again, being wise men, or wise persons, they might skip the
gift cards in favor of one of the options below.
Gifts that make financial sense
While perhaps the most convenient, gift cards are far from the
most personal way to give money. Here are six gifts that can
provide more meaningful forms of enrichment to the recipient -- and
in some cases the giver too.
1.
A child's first bank account.
This would be appropriate for a young, close relative. It is a way
of giving money that encourages saving. It can be made more
exciting if presented in a way that makes a child feel grown up,
and if you emphasize the prospect of more rewards to come in the
form of
savings account interest
.
2.
A 529 plan contribution.
A 529 plan is an educational savings plan that allows investment
earnings to accrue tax-free. Contributions to these plans must
ultimately be used for educational purposes by the designated
beneficiary. Contributions are also subject to gift tax rules, but
that won't be a factor unless you plan on giving someone more than
$13,000.
3.
A certificate of deposit.
In particular, a long-term CD can be a good choice when you want to
give a teenager the option of using the money on something other
than education, yet you want to discourage them from spending it
right away. An added advantage is that long-term CD rates generally
exceed standard savings account interest rates.
4.
A charitable contribution in someone's name.
Giving financial gifts to kids is socially acceptable, but it can
get a little tricky when it comes to your peer group. One
alternative is to give a charitable contribution in the person's
name. This form of gift can be more meaningful if you take the time
to find a charity that the recipient likes to support.
(OK, so you want to give something more personal? Gifts 5 and 6
make financial sense for the giver, but also offer a very personal
touch.)
5.
A communal dinner.
This works best in a peer group of friends or co-workers, and can
make financial sense for everyone involved. Rather than exchanging
gifts you aren't sure people will want, plan a dinner where
everyone is responsible for one aspect of the meal. Get together to
prepare and eat that meal, and you'll find you've given each other
something very valuable: each other's time.
6.
Baked goods -- with a twist.
Baked goods are a time-honored and cost-effective gift. But rather
than giving them at the holidays when everyone is already
overloaded with food, consider a twist like making your own "cookie
of the month club" through which you give small batches of treats
throughout the year.
A final caution on gift cards
Gift cards represent a $100 billion annual business, according
to research firm
CEB TowerGroup
. The popularity is understandable. Gift cards are convenient for
the giver, and more useful to the recipient than getting something
they don't want. Perhaps the most significant thing gift cards have
accomplished is they've made it socially acceptable to essentially
give money as a gift no matter the nature of the relationship.
But for all their merits,
gift cards are not without flaws
. Although the 2009 CARD Act cleaned up some of the most onerous
terms imposed upon gift card users, many still charge way too much.
Gift cards can charge for buying the card, using the card, and for
not using the card. Furthermore, people too often simply fail to
use the full value of their cards -- an oversight that cost
consumers about $2 billion in 2011 alone, according to CEB.
So if you decide to give a gift card, make sure it carries a
minimal amount of fees and a distant expiration date. However, if
you really want to resemble one of the wise men or women this
holiday season, you'll at least consider the sensible alternatives
listed above.