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Best Financial Gift for a Friend’s Newborn?

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I have several friends who either have had or will have a baby in the next coming months. I'd like to get a gift that would give the child a good financial start. Bonds have been the traditional gift for years, but I'm not sure the return on them makes for a very good long term investment. I'm looking to give something around $75.

The next question is whether I should give the gift to the child or the parents. I've heard that financial gifts in the child's name could limit his/her ability to get financial aid when the time comes. On the other hand, there are rumors that my fiancee's parents used money given by her grandparents for themselves (not that they didn't raise her, spending much more money overall). Any thoughts on this?

Lastly, I wouldn't have a social security number for the gift and wouldn't want to use my own - it would probably just confuse things. So hopefully this won't be a problem. I appreciate any ideas you might have.

Update: For grandparents, aunts, uncles, and other relatives: do you and the family of the newborn live in Canada? Consider opening an RESP Canada savings plan for the future post-secondary education of the baby. Money can grow tax-free until it is withdrawn, and anyone can contribute over the years. It's a thoughtful gift idea that should help the new parents worry a little less about starting a savings account for their child.

Last updated on January 26, 2011.

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3 Responses to “Best Financial Gift for a Friend’s Newborn?”

  1. thewegger says:

    Classy gift. I should have done this for my buddy’s daughter a few years ago.

    I agree that savings bonds aren’t the best long-term investment as far as returns, but they are probably the simplest. I believe they can also be used tax-free towards college tuition.

    I’ve just started to look into cashing my savings bonds. Half of them are solely in my mother’s name, which is a giant hassle. If she cashes them, she has to pay taxes on the interest income. Transferring ownership in-family is allowed, but is a pain in the neck for paper bonds, and tedious for electronic bonds (savingsbonds.gov).

    I think the best way to do this is to assign the bond to the parent with the child as the co-owner, if you think the parent will be more responsible than the child. If not, I’d assign it solely to the child.

    I had about $2k in paper savings bonds (face amount) in my name when I was in school. I never had a problem getting financial aid. I’m not sure if the gov’t is completely aware of ownership until a bond is cashed, unless it’s an electronic bond.

    I don’t think it’s a problem if you don’t have a SS# for the infant. There are several different numbers on my bonds (parents, purchasers, siblings, etc.) and it hasn’t made a bit of difference. The important thing is to get the name right (no typos!). Unless you’re worried about privacy, using your own number shouldn’t be an issue. Taxes are paid by the cashing owner.

    I’ve found these sites pretty helpful:
    savingsbonds.gov (treasury dept)

  2. […] Best Financial Gift for a Friend’s with a Newborn? […]

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