What does Warren Buffett give his family for Christmas? Not so fast — you’ll have to endure some important background information to understand the full wisdom of his gifts. Mary Buffett, Warren’s former daughter-in-law, shared what Christmas was like with the Oracle of Omaha. She revealed in a 2019 interview that “He (Buffett) would always give each of us $10,000 in hundred-dollar bills” and admitted "As soon as we got home, we'd spend it — whooo!” That didn’t go over well with a man whose number one rule is “never lose money.”
She continued, “Then, one Christmas there was an envelope with a letter from him. Instead of cash, he'd given us $10,000 worth of shares in a company he'd recently bought, a trust Coca-Cola had.” Mary Buffett wasn’t disappointed in the least. In his letter “he said to either cash them in or keep them.” Mary Buffett wisely chose to keep the stock and bought more shares.
I think when Warren Buffett does something, it's worth taking notice. His decision to give financial gifts that couldn't be readily squandered should give us all cause to rethink cash gifts. This Christmas you can give your family the gift of a legacy and build familial wealth and financial well being for generations to come. I spoke with Jaime Eckels, CFP and Wealth Management Partner with Plante Moran Financial Advisors, about the best financial gifts for your kids and grandchildren this holiday season.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What's a better gift for your loved ones this holiday season than the chance to build wealth? Here are three different gifts that can give your family a financial head start:
1. A professional financial check-up
Financial literacy in America is lacking. One measure of personal finance knowledge is the P-Fin Index, which is shorthand for The TIAA Institute-GFLEC Personal Finance Index. This index explores eight functional areas across finance, such as earnings, savings, insuring and comprehending risk.
Too many Americans get a failing grade. The 2024 P-Fin Index reveals that, on average, U.S. adults correctly answered only 48% of the 28 index questions. Even more alarming, all generations are seriously lagging in their "comprehending risk." On average, only 35% of these questions are answered correctly.
A session with a financial adviser can help people properly prioritize their financial goals, according to Ms. Eckels. Whether they are starting to save or inching toward retirement, a financial check-up can bring clients a new perspective and clarity. A professional can help your family members get on a path to make choices that will get them closer to their goals, such as buying a home or meeting retirement savings objectives.
Wealth management firms offer a variety of services, from creating detailed savings plans over decades to advice on buying a home or ways to invest an expected inheritance. Getting a one-time financial plan, an insurance review or a 401(k) allocation check are other ways your family members could use a meeting with a financial professional.
2. Match Roth contributions
Ms. Eckels emphasized that gifts can be more than an "opportunity to give stuff." Consider introducing the concept of long-term saving to the younger members of your family by offering to match contributions to a Roth IRA. The offer of a match may encourage the tweens and teens in your life to forgo another trip to Sephora or delivery from Amazon in favor of a deposit into a Roth IRA.
Recent college graduates will appreciate the opportunity to save more for the future as they try to pay down student loans and meet monthly living expenses. Your offer to match their contributions can be more memorable if you demonstrate how much money they can earn through the power of compounding growth.
For instance, a one-time contribution of $7,000 in a Roth IRA — with no additional contributions at all — would grow to about $139,550 in 50 years (assuming a 6% investment return and monthly compounding), according to NerdWallet.
The biggest obstacle to opening a Roth IRA for a minor is having earned income, not age. The IRS defines Earned income as taxable income and wages or money earned from a W-2 job or self-employment gigs. That can even include babysitting, dog walking or raking leaves.
You can open a custodial Roth IRA for your minor grandchildren. The retirement account would be owned by the minor but controlled and funded by an adult custodian until the minor comes of age.
Remember, if you want to contribute to your child's Roth IRA or match your child's contributions, that's fine as long as they have at least as much earned income as the total contribution amount.
Keep in mind that money that you contribute to the Roth IRA can count as a gift within your yearly gift tax exclusion ($18,000 for 2024 and $19,000 for 2025).
“Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1.”
Warren Buffett
3. Appreciated stock
If you’re thinking about your legacy, gifting stocks can be a valuable tool. Few gifts have the potential to be worth more tomorrow than it is today. That is one of the unique upsides to giving the gift of stock. And gifting stock is easier than you think; you can gift stock to kids through a custodial account, and you can gift stock to adults with a simple transfer. And this type of gift may offer a few tax and estate planning perks for you.
Gifting stock instead of cash can be a great way to help younger investors with their savings and investing goals. To gift stock to a minor, you can open a custodial account, called an UGMA or UTMA. This allows you gift securities to a person who is underaged without giving the child authority to sell the shares until they reaches the age of majority. In the case of an adult, your adviser or brokerage firm can transfer ownership of the actual shares to your recipient.
When gifting to a minor, consider that the funds in the account are considered the child’s assets and must be included on the FAFSA (Free Application for Federal Student Aid), which may reduce the amount of financial aid they receive. There is also the Kidde tax that will apply to unearned income, such as dividends, that exceeds $2,500 and is taxed at the parent’s tax rate unless the child’s rate is higher.
Ms. Eckels, of Plante Moran, highlighted the potential tax and estate planning benefits of gifting appreciated stock. By gifting appreciated stock, you transfer the gains to the recipient and avoid having to sell the stock and pay capital gains tax.
Bottom line
Buffett is a long-term investor who believes it is more important to focus on the future potential of a company rather than its short-term performance. This is a philosophy we mere mortals can apply to our investments because there are no shortcuts to building a solid financial foundation. Unless, of course, your father-in-law is one of the most successful investors in American history.
Related Content
-
April RMD? Five Tax Strategies to Manage Your 2025 IncomeTaxable Income The April 1, 2025, deadline for required minimum distributions (RMDs) is fast approaching for retirees who turned 73 in 2024.
-
Rising AI Demand Stokes Undersea InvestmentsThe Kiplinger Letter As demand soars for AI, there’s a need to transport huge amounts of data across oceans. Tech giants have big plans for new submarine cables, including the longest ever.
-
Return to Your Home Country to Retire: Repatriation RetirementThey came to the U.S. to live and work, but they want to retire in the old country. Here's how to juggle the move back home.
-
The Three Biggest Fears Keeping Retirees Up at NightHere are the steps you can take to put those fears to rest and retire with confidence so you can relax and enjoy the life you've planned.
-
What Can a Donor-Advised Fund Do for You? (A Lot)DAFs and private foundations go about helping charities (and those who donate) in different ways. Each comes with its own benefits and restrictions to navigate.
-
Estate Planning When You Have International AssetsEstate planning gets tricky when you have assets and/or beneficiaries outside the U.S. To avoid costly inheritance mistakes, it pays to understand the basics.
-
Three Essential Estate Planning Steps to Protect Your Nest EggAfter dedicating years to building your wealth and securing your future, make sure your assets are protected and your loved ones are provided for in the future.
-
Is Chasing the American Dream Ruining Your Financial Life?Too many people focus on visible affluence as a marker of success. Here's how to avoid succumbing to the pressure and driving yourself into debt.
-
Retiring With a Pension? Four Things to KnowThe road to a secure retirement is slightly more intricate for people with pensions. Here are four key issues to consider to make the most out of yours.
-
Revocable Living Trusts: The Good, the Bad and the UglyPeople are conditioned to believe they should avoid probate at all costs, but when compared with living trusts, probate could be a smart choice for some folks.
