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6 Holidays Gifts That Make Financial Sense

If the three wise men arrived in Bethlehem today, would they come bearing gifts -- or gift cards?

After all, somewhere in the last couple millennia, frankincense and myrrh have fallen out of favor as presents. Gold is still popular, but a little heavy to lug around. So, 21st-century versions of the three wise men (which by now would surely include at least one wise woman) might do what so many of their modern-day peers do: fall back on gift cards.

Then again, being wise men, or wise persons, they might skip the gift cards in favor of one of the options below.

Gifts that make financial sense

While perhaps the most convenient, gift cards are far from the most personal way to give money. Here are six gifts that can provide more meaningful forms of enrichment to the recipient -- and in some cases the giver too.

1. A child's first bank account. This would be appropriate for a young, close relative. It is a way of giving money that encourages saving. It can be made more exciting if presented in a way that makes a child feel grown up, and if you emphasize the prospect of more rewards to come in the form of savings account interest.

2. A 529 plan contribution. A 529 plan is an educational savings plan that allows investment earnings to accrue tax-free. Contributions to these plans must ultimately be used for educational purposes by the designated beneficiary. Contributions are also subject to gift tax rules, but that won't be a factor unless you plan on giving someone more than $13,000.

3. A certificate of deposit. In particular, a long-term CD can be a good choice when you want to give a teenager the option of using the money on something other than education, yet you want to discourage them from spending it right away. An added advantage is that long-term CD rates generally exceed standard savings account interest rates.

4. A charitable contribution in someone's name. Giving financial gifts to kids is socially acceptable, but it can get a little tricky when it comes to your peer group. One alternative is to give a charitable contribution in the person's name. This form of gift can be more meaningful if you take the time to find a charity that the recipient likes to support.

(OK, so you want to give something more personal? Gifts 5 and 6 make financial sense for the giver, but also offer a very personal touch.)

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