3 Alternatives to Cash Gifts for Graduation
With graduation season upon us, you may be thinking of rewarding your new grad with a fancy keepsake or even a check—but why not consider something more purposeful?
"Cash, gift cards, or personal items are certainly fine gifts," says Susan Bober, director of tax, trust & estate at Schwab Wealth Advisory, "but if you really want to help your grad get off to a good start, you might consider these gift alternatives that have the potential to last."
1. Help establish a Roth IRA
A jump-start on retirement savings can help pave the way for financial well-being down the road. "A Roth IRA, in particular, is a great way to go because the money can grow tax-deferred during their working years, and withdrawals in retirement could be tax-free," says Chris Kawashima, CFP®, director of financial planning at the Schwab Center for Financial Research. (To qualify for tax-free withdrawals of earnings, account holders must be 59½ or older and have owned the account for at least five years.)
Note that your contribution toward a Roth IRA will be limited to your grad's total earned income or the annual maximum ($7,000 in 2025 for individuals younger than 50)—whichever is less. Also, note that unused 529 plan assets that satisfy certain conditions set by SECURE 2.0 Act could potentially be rolled over to a Roth IRA.
2. Help them buy stock
Introducing young people to the inner workings of the stock market is a lesson in financial literacy. "Helping them invest a cash gift allows you to teach them important concepts, such as research, diversification, and rebalancing, to maintain their ideal asset allocation," Susan says.
One accessible option for young investors are stock slices, or fractional shares. Generally, when you buy stocks, you have to buy at least one share. But some stocks sell for hundreds of dollars or maybe just more than a young grad has to spend. Stock slices will allow them to buy a "slice" of stock that represents a partial share, for as little as $5.
Want to learn more about Stock Slices? Get more details here.
3. Lighten their student loan load
For students who graduated in 2023 with a bachelor's degree, 50% graduated with debt, and for those students, the average loan burden was $29,300.1 And about a third of graduates with loans are still making payments when they're 35–45 years old, based on Federal Reserve data from 2022.2 For many grads, it can be daunting to start out in the workforce—likely in an entry level position—while paying hundreds of dollars per month in loan payments on average. Instead of contributing a lump sum, however, you might match a new grad's student loan payments for a specified period. "That way, they're still on the hook for practicing good money habits like paying their bills on time," Susan says.
Monetary gifts aside, one of the best things you can give a new grad is the benefit of insight. "Imparting some of your own hard-earned wisdom—including your mistakes—can help them make smarter financial decisions in their own lives," Chris says.
1 "Trends in College Pricing and Student Aid 2024," New York: College Board. Page 44.
2 The Fed - Chart: Survey of Consumer Finances, 1989 - 2022 (federalreserve.gov)
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The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
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Schwab Wealth Advisory™ ("SWA") is a non‐discretionary investment advisory program sponsored by Charles Schwab & Co., Inc. ("Schwab"). Schwab Wealth Advisory, Inc. ("SWAI") is a Registered Investment Adviser and provides portfolio management for the SWA program. Schwab and SWAI are affiliates and are subsidiaries of The Charles Schwab Corporation.
Diversification and rebalancing strategies do not ensure a profit and do not protect against losses in declining markets.
Rebalancing does not protect against losses or guarantee that an investor's goal will be met. Rebalancing may cause investors to incur transaction costs and, when a non-retirement account is rebalanced, taxable events may be created that may affect your tax liability.
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