Graduation gift idea

Are you looking for the perfect graduation present?

I have the perfect graduation present that you can get for your child, niece, nephew, grandkid, etc that will not only show them your love and thoughtfulness, but also will set them up for long term financial stability and success. This is the perfect high school or college graduation present and can be for anyone.

Instead of a physical gift that can't go to college or a new place with them, why not gift them with an investment account that can go with them anywhere in the world while growing year after year for the rest of their lives? That's right, you should gift your graduate a Roth IRA account and initial contribution.

Why is a Roth IRA the best graduation present?

Opening a Roth IRA truly is the perfect graduation gift as it can be for anyone and it will only grow over time. It is not a gift that may end up at Goodwill or in the trash, it cannot be lost or destroyed, and it will stay with them for as long as they want, and remind them of you and their relationship with you. I really wish I had revieved this as a gift after my high school graduation.

How do I gift them a Roth IRA for graduation?

It's pretty simple- just requires a bit of communication and money of course. If you are not the graduates parents, I would suggest talking with them or with the graduate first so you can get some information to open the account for them. You could even open it with the graduate so they can learn how to get in the account and buy investments- a lesson and a gift all in one!

Step 1: Choose a brokerage firm

This part stops a lot of young people from starting investing, so you can remove that barrier from them by picking a brokerage firm for them. Some good options are Schwab, Fidelity, or Vanguard. Just pick one- they all offer the same services and will all be great for your graduate.

Step 2: Open a Roth IRA

Once you have picked the brokerage firm for the perfect graduation gift of a Roth IRA, you of course need to Open a Roth IRA. Before you do this you need to know some basics. If the graduate is under 18, it must be a Custodial Roth IRA (this will turn into a normal Roth IRA when they turn 18). The graduate must have earned income. So if your graduate does not make any money with a summer job, then this isn't an option, but if they do make even a few hundred bucks a year, then you can fund the Roth IRA up to the amount of earned income they make each year. For example, if your graduate makes $2,000 a summer at their job life guarding, then you could contribute up to $2,000 to the Roth IRA.

Once you have figures out of they need a Custodial and how much money you can contribute up to, you are all set to Open the account with them (or their parent/s).

Step 3: Make your contribution gift

Once the Roth IRA account is open, you can link one of your accounts to it and make your contribution as your graduation present. This could be $20 or $200 or it could be anywhere up to $6,000 (if your graduate has an earned income of $6,000) as that is the yearly limit of the Roth IRA because it is so tax advantaged.

Step 4: Buy the investments

I think this is a great step to talk with the person you are giving this gift to so they can learn how to do this themselves in the future as they start to save an invest. I truly think this part is an even better gift than the money or account because unfortunately personal finance, saving, and investing is not taught in schools. Talking with your graduate about what financial goals they have and showing them how to open an investment account and buy a stock will last them their whole life.

I suggest buying an ETF or an Index Fund as part of their gift as it is a great low-risk option that will teach the that buying whole baskets of stocks is a great option.

Step 5: Celebrate!

That is it! Now this may seem more complicated than buying them a sweater or dorm supplies, but this gift will last them a long time and teach then such a valuable skill to bring to the next stage of their life.

You may have come here looking for a personalized graduation gift of a ring or necklace, but I do hope you leave knowing that a Roth IRA is truly the best graduation gift you can buy your graduate.