Monday, May 18, 2009

Cash: The Gift that Keeps On Giving

This morning a woman asked Amy for some help in selecting a college graduation gift for her grandniece (is that the same as great-niece? That's what we always called it...). I think Amy's suggestion is a really good one:

Dear Amy: My grandniece is graduating from college in two weeks, and I am perplexed as to what would be an appropriate gift. When she graduated from high school, we gave a quite generous cash gift. Now she will be returning home to live with her parents and will be employable.

She has a car, and all her college expenses were paid for by others. Should we give money again? — Perplexed

Dear Perplexed: There are myriad acceptable gifts besides cash, such as books, artwork or heirlooms. I also like the idea of helping set up a college graduate with a very long-term investment, rather than giving cash.

You should check with your accountant to see if you can set up a retirement fund for your grandniece. You could fund it initially with a gift to her now — and encourage her to sock money away.

If the aunt chooses to give money, I think this is a great way to do it. Forward-looking grandparents often do this when children are born, typically to save specifically for college. Ideally, this plants a seed about saving and investing in the minds of the children, and encourages them to do the same for themselves.

That is, if they have any income to spare. If they have a place to put it. And if they were aware of the investment, its changing value over the years, and its direct impact on their college experience, or some part of it.

The last of these "ifs" may be the least likely, in particular in a case where college was entirely all-expenses-paid for the student. But this is a lesson it's never too late to start learning....though the earlier it is learned, the more benefit can come from it.

The aunt seems skeptical about giving cash, apparently because the girl didn't really "need" it before. Now that she's "employable," the implication seems to be that she really won't. But even if she finds a good, steady job right away, it's unlikely that as an entry-level college grad she'll have much spare money to set aside for the future, or much of a retirement plan. Setting one up and encouraging the recipient to follow it and add to it (hurrah for Direct Deposit making this really easy...) would be a gift worth a lot more than just the initial cash value.

To me it seems a leeetle strange that the aunt seems so gun-shy about giving money, again, apparently based on the fact that it seems to have been spent frivolously (or at least she seems to think so) the last time she did. This rubs me just a little bit the wrong way. A gift is a can't specify how it will be fact, I tend to think that cash gifts are meant to be spent on, well, a gift or gifts for oneself: a nice dinner out with friends, a new outfit, an armload of books, etc. to celebrate the birthday, graduation, or whatever.

If the aunt wants the money she gives to be put toward "good" use, I think Amy's suggestion about setting up an investment is the best way to approach it. But if she's going to be so particular, I think I'd encourage her not to give money at all, and to just stick to something over which she has more control (though she still can't prevent the niece from selling the "artwork" or "heirloom" on ebay).

I'll wrap up with one of my favorite Carolyn mantras: When it comes to graduations, weddings, and other gifty occasions, it is never acceptable to ask for money, but it is always acceptable to give it.

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