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TL;DR: Dressing up a financial transfer with a beautiful presentation, personalized messaging, a greater purpose (like investing in the future or reaching a goal), and a practical way to use the funds can turn a dull transaction into a thoughtful monetary gift for the future.
Financial gifting has been around throughout human history, from gifts of gold, savings bonds, payment apps, to the newest financial gifting platforms like Greatest Gift.
We give gifts for many reasons, always with the intention of showing the gift receiver how much we care. In particular, giving a monetary gift can show that we care about the recipient’s future, especially when giving the gift to a baby, a child, or a young couple that is getting married.
However, if not done right, giving a cash gift can signal lack of effort or thought.
Giving a monetary gift can show that we care about the recipient’s future, especially when giving the gift to a baby, a child, or a young couple that is getting married.
In this article we explore the definition of a monetary gift, how to transform a routine transfer of funds into a personal monetary gift, the different ways you can give a monetary gift in 2021, and a few additional points to consider around gift etiquette and taxation.
In the most straightforward explanation, a monetary gift is the transfer of money or a financial instrument that has liquid monetary value from one party to another, without receiving or expecting to receive anything in return.
Sounds a bit dry, doesn’t it?
By this definition, handing over a $20 bill to your friend without expecting anything in return constitutes a monetary gift, even though it may not feel like a gift! The same goes for sending cash gifts on peer-to-peer payment apps where “The lack of effort required to give a cash gift or gift card digitally is a signal - it might be an incorrect signal - of a lack of care for the person.”
So, what makes a transfer of money more of a gift giving experience that shows you care and signals thoughtfulness?
Up ahead we’ll take a look at some gifting psychology, and break down the four P’s that transform a boring, impersonal transfer of funds into a personal, thoughtful cash gift.
A great gift comes with great presentation. Every chef knows that customers eat with their eyes first and the same goes for gifts – the first thing we notice (and expect) is the presentation of the gift. A quick look at the gift-wrapping market size shows just how important the presentation of a present is, with $5B in market size that has been growing steadily at 7% per year for the past 5 years.
Putting in some extra effort to make sure the gift is dressed up and has that wow factor goes a long way in transforming cold cash into a monetary gift. The same goes for digital money, and digital monetary gifts, where presentation has an even bigger impact on creating a great gifting experience.
Giving gifts is an act of building relationships, often accompanied with symbolic messages of giving, care and even love. A cash gift may seem impersonal, which is why there is need to add an element of personalization. The importance of personalizing gifts is sometimes overlooked by gift givers, who often underestimate the importance of sentimentality in gift giving. In fact, gift recipients prefer to receive gifts with sentimental value over superficial things.
Personalizing a gift with pictures, videos, or personal messages adds an emotional component to an otherwise dull transaction and creates a keepsake that will be remembered even after the cash funds have been combined with other account balances or spent. This creates the best of both worlds – a sentimental gift, along with a practical gift that meets the gift receiver’s needs.
A great gift comes with great presentation.
In gift giving, it’s often the thought that counts. Handing over cash or sending a Venmo with a gift emoji requires little to no effort on the gift giver’s behalf and may signal lack of care towards the gift receiver. Adding purpose to the gift can turn another wise plain money transfer into a thoughtful gesture.
A gift with purpose is a gift that goes towards a greater goal and helps the gift receiver achieve a more meaningful financial (or other) goal like purchasing a house or affording college education. By helping gift recipients on their financial journeys gift givers show they put thought and consideration into giving the gift.
Perhaps the most obvious and still very important element of a monetary gift is the practicality of it. As the definition describes, the monetary gift needs to have an easily transferable financial value.
It has to be easy to give and equally easy to receive, thereby pleasing the gift receiver.
A cash gift needs to be pragmatic, useful, and provide the maximum value it can. When speaking of financial gifts, the potential financial value of the gift is a key factor in determining the value of the gift itself.
Now that we understand how to transform a dull financial transfer into a fun gift, let’s dive into examples of how to give money as a gift.
If you’re looking to invest in a child’s future in a fun and meaningful way, empower a family on their financial parenting journey, or just send a personalized cash gift with purpose, Greatest Gift is the way to go.
Greatest Gift is the financial gifting platform that turns an otherwise regular transfer of funds into a meaningful gift that continues to show parents how to save and invest for their children.
Greatest Gift was built for parents, kids, family, and friends. The presentation element and personalization options are on point, complete with digital confetti, fun colors, personal pictures and video greetings and a gift flow like no other. Together, the presentation and personalized greetings create an incredible digital gifting experience.
Gift receivers get to choose how to use the money and are consistently encouraged to save and invest for the future with 529 plans, investment accounts or other long-term savings accounts. If they don’t know where to start, Greatest Gift provides timely recommendations and a curated collection of financial products, guides, and life hacks.
How to send a monetary gift with Greatest Gift
The gifts are very practical and easy to give – all you need is a recipient’s phone number or email and a payment method (credit card or bank account). Gift receivers get gift notifications along with greetings (there’s even digital confetti involved) and can transfer gift funds directly to their favorite savings and investment accounts.
You can personalize the gifts with video greetings, pictures, and notes.
To send a gift, go to Greatest Gift’s give-a-gift page. Start the gift with a greeting, either video, picture or note will work (we like to add a personal video greeting or a picture of us and the gift recipient). Choose a gift amount and delivery date and add the gift receiver’s contact info - either email or a US phone number will work. Finally, choose your payment method, and confirm the gift.
The whole thing can take as little as 30 seconds.
The platform itself encourages gift receivers to save and invest gifts they receive and provides a collection of financial products and guides on how to use them best.
With an average interest rate of 7%, a $100 gift can grow by as much as 3.5 times in 18 years, but the true power of the gift comes from building the right saving and investing habits early on.
Greatest Gift introduces gift receivers to the right saving and investing best practices, building up their confidence in taking new financial steps and constantly encouraging saving and investing for the long term.
Giving cash or a check as a gift is a classic option. And sure, handing over a $100 bill answers the definition of a monetary gift, but in order for it to feel like a real gift it needs a lot of dressing up. On their own, neither cash nor checks have the presentation or personalization elements required to make for a thoughtful gift.
The best practice is to get an envelope and greeting card and write a handwritten note, to add a bit more to the gift’s presentation. But that’s about as much as it goes.
If not done right, giving a cash gift can signal lack of effort or thought.
As far as purpose and potential value go, cash is pretty limited. Sure, cash can be used for anything, but you’ll typically find it sitting in the gift receiver’s wallet until the next time they fill up on gas.
Giving cash or a check may have been the predominant way to give money as a gift due to how easy it is to give, but with global use of cash diminishing over 20% in the past ten years it may be time to try something new.
The digital equivalent of handing over cash. Convenient to use but lacks a certain je-ne-sais-quoi. Or actually I do know quoi, it lacks that gift feeling.
Peer to peer payment apps like Venmo managed to create a fantastic mechanism for transferring funds from one person to another in the quickest, simplest way possible, but quick and simple doesn’t really translate to a great gifting experience. In fact, P2P apps are designed for transactions and settling bills (like paying back a friend for that Uber ride), so it’s understandable why they lack in this area.
To send a “gift”, simply initiate a transfer to a friend or relative, and add a gift emoji.
The presentation is limited to a few lines of text or emojis, and the potential value is still limited. Funds can be transferred to checking accounts, where they will stay.
Savings Bonds were the gift of choice by many financially savvy aunts and uncles that wanted to give the gift of a brighter future to their nieces and nephews. You may even have a paper version that you received once upon a time for your first birthday in your parent’s garage.
But a few things changed since those days.
In 2011 the IRS stopped selling the paper version of Savings Bonds and moved exclusively to selling the electronic version on the TreasuryDirect Website (unfortunately, it doesn’t look like they updated the website since then).
The move made giving a Savings Bond as a gift a difficult process and removed many of the presentation and personalization elements that were possible with a paper bond, like adding handwritten greetings, greeting cards, bows, or other decorative elements.
Now let’s clear up a few things – Treasury Bills, Treasury Notes, and Treasury Bonds, in addition to Series EE Savings Bonds and Series I Savings Bonds are all forms of debt that you can give to the US government in return for interest on that debt. However, only Savings Bonds (both series EE and I) can be given as gifts, so we’ll focus on those.
In order to buy a Savings Bond as a gift, you will need to know the recipient’s social security number and in order to “deliver” it you’ll need the recipient’s TreasuryDirect account number (if they don’t have one, they will have to open an account and tell you the account number). Not only that, but you will have to hold the gift in your account for five business days, so make sure you plan ahead.
How to give a Savings Bond as a Gift
If you’re still interested, head over to the Treasury Direct website, and create your account. Choose the bond you would like to purchase, enter the gift recipient’s name and social security number, and mark the box “This is A Gift” on the purchase page. Complete the purchase to find the savings bond in your account’s Gift Box area.
To deliver (i.e. transfer the bond to the gift receiver’s Treasury Direct account), go to your Gift Box area, enter the recipients’ TreasuryDirect account number on the bond you want to send and hit submit.
Potential Value of Savings Bond as a Gift
The only silver lining is the potential value (although there are some caveats there). A Series EE Savings Bond comes with a guarantee from the US government that their value will double if you hold them for 20 years at least. That guarantee makes the bond’s effective interest rate 3.5% per year, not bad for a government backed investment. There are a few things to consider though. The bonds have to be held a minimum of one year and cannot be redeemed before that. If redeemed before five years pass, the bonds incur a penalty equal to the last three months’ interest gains. And don’t forget, if you don’t hold for 20 years, the interest and earnings could be significantly lower.
If you want to spark someone’s interest in the financial field, or you just have a stock that you really like (or better yet, think the gift receiver would like!) and want to give it as a gift, you may be looking to give individual stocks as gifts.
While the idea of giving stock as gifts in theory sounds great, in practice it may prove to have some fault.
Since the internet basically removed the need for paper stock certificates, the act of giving stock as a gift has become a digital, clumsy process.
How to give Stock as aGift
First, you’ll need to buy the stock and hold it in your own investment account. Next, you’ll need to initiate a gift transfer of the stock, a process that may require writing a letter to your broker with details like the recipient’s social security number, a detailed description of the securities you're gifting, the name, address, and Depository Trust Company (DTC) number of the receiving broker (if the receiver has a broker other than yours), and the receiver’s account number at the broker.
Here’s an example of how you can send gifts with Fidelity.
It doesn’t really feel like a gift with all this red tape you have to go through. The presentation is non-existent. As for personalization, it can be nice to pick a stock that you know the receiver will appreciate, but that’s as far as you can take it.
There are companies like GiveAShare that try to add on a gifting experience and offer single shares of stock as gifts.
GiveAShare.com have turned giving stock into an actual gift, personalized with a keepsake – the actual stock certificate (or a replica certificate and electronic registration when companies no longer offer paper stock certificates) with a personalized plaque.
However, it does come with an added price of $84 to the stock price for the gifting process, registering the stock, and the personalized frames. This makes a great gift for kids and can definitely spark their interest in stock ownership, but keep in mind the additional cost does take away from the potential value of this as a monetary gift.
Best for the gifters that are looking to give the gift of higher education.
529 plans are tax advantaged investment accounts that allow parents to save and invest for K-12 tuition and higher education costs.
With 529 plans you have two options – contribute to an existing 529 plan (typically owned and managed by the parents or guardians for the child’s benefit) or open a 529 plan for the child yourself and manage it until the child is grown up and going to college.
The latter can prove to be a bit of a hassle and requires information like social security numbers, but lets you keep control of the investments. This option is typically appreciated by close family members who are looking to give large amounts of money and potentially cover a large chunk of the college cost.
Contributing to an existing529 plan can be an easy process, assuming the 529 plan has a gifting portal or shareable link. Some plans only accept checks in the mail with the recipient’s exact account information (so make sure you get the information right!). Keep in mind, this is only possible assuming the parents or guardians already have an account set up for their little one AND shared a gift giving link or the account number with you.
If there is no account, or if you don’t have the right link or account number, you won’t be able to contribute a gift.
In terms of gift presentation and personalization, contributions to 529 plans are a still a bit outdated for 2021 and usually consist of printable gift coupons or a message via email.
How to Contribute to a 529 Plan as a Gift
To contribute, first ask the parents or guardians if they have a 529 plan open. If not, you may be out of luck.
If they have an account, ask for the specific process to contribute and follow that process.
Gift contributions to 529 plans have a high growth potential since the funds can be invested in portfolios that have a good earning potential with no taxes on the earnings (as long as the funds are used for education expenses).
When you don’t know exactly what to get someone, still want to get something, and cash just seems a bit awkward, you can go for a gift card.
Gift cards are a popular choice for many even though they are often not utilized for their full value.With a gift card you can choose a debit card (for general spending anywhere) like Visa or a business that the receiver likes and add that extra bit of personalization. Getting a greeting card and writing a handwritten personal note will go a long way for presentation and personalization.
Keep in mind that if you do choose a debit gift card you will have to pay an additional purchase fee on top of the card’s value. This is typically somewhere between 5-10%, depending on the total amount of the card (the higher value the card, the lower the fee in percentages).
You may be asking yourself “is money even acceptable as a gift?”
The answer may depend on the occasion surrounding the gift.
While cash may be the gift of choice for the majority of Americans as a holiday present, it doesn’t mean it makes for a good gift for your spouse on your anniversary. When it comes to kids, most occasions make for a great opportunity to give a monetary gift, with the understanding that the money is intended as an investment in the child’s future. Think baby showers, grandson’s briss, a niece’s first birthday or your nephew’s graduation.
Another important piece of advice is to know your audience – many actually prefer to receive monetary gifts, no matter the occasion. For example, if you’re going to a wedding or baby shower and the happy couple have a very limited gift registry along with a link for a financial gifting platform, they may be signaling that they prefer to receive cash for their future.
Finally, if you consider the 4Ps above, adding presentation, personalization, purpose, and practicality, you can transform any transfer of funds into an acceptable, thoughtful monetary gift that has an extra bit of wow.
If you’re on the receiving side of the gift and want to signal (or flat out ask) for money as a gift, you’re not alone. Most young parents prefer to receive cash as gifts so they can cover future college expenses or all the other expenses of parenthood.
There are a few ways to politely let people know cash is your preferred gift. One way is to set goals and communicate them to your loved ones. When gifting for a goal, gifts gain a greater purpose, and a 100$ bill can turn into a gift of long term savings.
Another way is perhaps the most practical way to ask, and will also make things easier for your guests - simply add a link to a financial gifting platform like Greatest Gift to your event invite with a short intro line “we’re saving for baby’s future / our home /anything else with Greatest Gift”. This way you’re communicating your goals while providing an easy way to send meaningful gifts.
Determining how much to give depends on a combination of the occasion and the closeness level with the gift receiver.
The closeness level is easy to determine - the closer the gift receiver, the higher the gift amount. Think immediate family like siblings, parents and children, followed closely by your grandchildren, nieces and nephews. Close family friends and extended family follow, and then you have your friends, work friends, and distant friends (the ones you see maybe once or twice a year).
In terms of occasions, there are a few to consider. At the top of the occasion list, you have weddings, where gifts for friends average at $100 and gifts for close friends could easily reach $250. Next, you have baby showers, with an average gift of $125. Graduations are popular events for monetary gifts, with amounts going backwards from College to High School, Middle School, Elementary School, and even Preschool graduations (aren’t those the cutest?). Winter holidays are next, where more and more people make the case for cash gifts as their preferred gift instead of another knitted sweater. Finally, you have children’s birthdays with $50 on average for “regular” birthdays and a higher amount for a milestone birthday (Culture dependent, could be 12, 13, 15, 16, 18 or 21sth birthdays). Again, the numbers provided for occasions are averages, and can be adjusted based on the closeness level.
One last thing to consider when giving financial gifts is the tax implication on the gift giver and gift receiver. Let’s break it down by questions.
Who is responsible for paying taxes on gifts?
When it comes to gift giving, it is the gift giver that is responsible for paying gift taxes (if there are any). Not all gifts incur taxes. Read more ahead.
When are monetary gifts (or any other kind of gift) taxable?
When the total value of gifts given by a gift giver to the same recipient in a calendar year passes the IRS annual exclusion rate, the gift giver may need to pay taxes on the given gifts.
The IRS has an annual exclusion rate that defines the threshold of when a gift (or total amount of gifts in that year) qualify for tax purposes. In 2021 that annual exclusion rate is $15,000.
Note though, that not all gifts incur taxes. Gifts to a spouse and direct payments for medical bills or tuition as gifts are exempt from gift taxes.
How do I calculate the taxes on gifts?
If you think you passed or are close to passing the annual exclusion rate, make sure to fill out form 709 (or have your accountant fill it out) when tax season comes and find out exactly how much you owe on your gifts.
Whether you’re looking for a great monetary gift for your niece, a personal way to send cash for your cousin that’s getting married, or looking to invest in your granddaughter’s future education, you want to show that you care.
Make sure to consider the 4Ps that transform a transfer of funds into a thoughtful gift with a bit of wow:Presentation, Personalization, Purpose, and Practicality. Add these to any transfer of funds, or just use Greatest Gift and sit back as your gift of a brighter future transform a gift recipient’s life.