When my boys were younger, it felt like every 2 months either one or both of them were invited to a birthday party. Work in their birthdays and Christmas celebrations, each year I would watch my 2 boys and other children opening numerous gifts about 10 times! 

Now, here is a list of some of the popular gifts that I would see revealed from gift bags, wrapping paper, and otherwise at these celebrations:

  • Toys
  • Clothes
  • Books
  • Electronic games
  • Board games
  • Puzzles
  • Pets
  • Money
  • Gift cards 
  • Magazine subscriptions 

The list above not only reflects the gifts that I saw my sons and other children received, it also reflects some of the gifts that my sons gave to their friends and family members. 

While I had lots of fun watching my boys faces lit up with smiles, then bursting into laughter when they revealed their scores, and I felt very grateful for the friends and family members who contributed to their many joyous moments over the years, as their toy boxes overflowed and their drawers and closets became crammed with clothes, I thought about how much they had when other children were in need. 

Over time I started to stuff some of their toys into garbage bags, waiting for the proverbial pin to drop when they realized that some of their toys were missing. Luckily for me, the pin rarely dropped. And if a few weeks passed and neither of them complained or asked for the toys tucked away, I would put them in the bags for the Children’s Wish or Cerebral Palsy Foundations.  

These are two charitable organizations that would resell new or modestly used items to raise money for their foundations. 

Over time my boys would outgrow clothes that they’ve never worn — the purchase tags were still in tack on some when I was purging their closets. And I would give away puzzle boxes and board games that were never opened, and there were times I would even find cards that still had money or a gift card sitting inside them. 

I suspect this is a similar experience for many other mothers, even some of those mothers whose children later find themselves being stuck with large students loans or credit card debt because they didn’t have any education funds or funds available for them to buy school supplies and other school-related expenses. 

But what if we could identify more effective ways of gifting our children so that instead of fattening up retailers pockets from the gifts we purchase, and the government’s pocket from the taxes that these gifts attract, we fatten-up our  children’s pocket or their education fund instead? 

Would you change the way that you gift yours and other children? 

Here are a few things that I did in more recent years that I wish I’d thought of when my boys were younger. But as the saying goes, Better Late Than Never! So as soon as these things came to mine, the way I gift my boys and especially younger children, shifted.

  1. Set up a Registered Education Fund for your child/grandchild and ask gifters to contribute the $30 or $50 that they would used to purchase the gifts and pay the government more taxes in the process, to the child’s education fund. 

Doing this will have the government matching 20% of all contributions to the fund up to $500 each year to December 31st of the year the child is 17 years old. 

This would certainly help to reduce or eliminate school-related debt for the child.

  1. Buy a 20-pay Whole Life Insurance Policy for your child/grandchild — whatever face value is affordable! 

At the end of 20 years the policy will be paid-up, and the child will have the following benefits:

  • Insurance coverage for life
  • Cash surrender value if the child wishes to cancel the policy
  • Cash value that the child can borrow up to 90% from for tuition, wedding expenses, down payment for a home or car, and any large emergency expenses 

Doing this also allows the child to bank on himself – not having to borrow from the bank but to borrow from himself.

  1. Open an investment account for your child/grandchild and ask gifters to contribute the $30 or $50 that they would used to purchase the gifts and pay the government more taxes in the process, to the child’s investment account so the child can start benefitting from compound interest from an early age. 

And teach the child to Pay Himself First! A high percent (at a tender age, children don’t need money) of every money received should be deposited in the investment account. And show the child how much his money is accumulating. 

The accumulated funds from this account could be used for some of the same expenses mentioned in the third bullet from #2 above.

  1. I know that property prices may be higher than when I used this strategy 10 years ago, but if you can afford to, I highly recommend this strategy because it provided returns beyond my expectations. 

Buy an investment property for your child/grandchild. Aim for the rental income to cover the mortgage, taxes, and insurance. 

After 10, 15 or 20 years, you can refinance the property to get back your down payment plus money for the child’s tuition. And when the child completes university, the home is still available, and the child will have the following benefits:

  • Sell the home
  • Live in the home
  • Continue to rent the home and live with parents
  • Improve the home to attract more rental income
  • Refinance the home and use funds to purchase another home  

This is certainly not an exhaustive list of better gifting options for children. In fact, you may even have more effective gifting strategies that you have used before. But these are examples of the ones that I have used that have proven to be successful. 

Whether it is one of mine or your own strategy, the way you gift children going forward should not fatten up the pockets of retailers or the government. It should fatten up the pockets of the children being gifted. 

If your current way of gifting is not benefitting the child in the far future, you should rethink your gifting strategy now!