You’ve bought the kids holiday gift cards for toys, clothing and fast-food burgers and fries. How about gift cards for a college savings account?
You can easily do that, thanks to some innovative products offered by a handful of Internet-based companies.
Gift cards linked to a child’s college savings plan, such as a state-sponsored, tax-advantaged 529 account, were novelty items when introduced several years ago. But lately they’ve been gaining traction as families struggle to sock away money for tuition and textbooks.
A recent survey of parents by the nonprofit College Savings Foundation found that 92 percent believed college savings gift cards and other nontraditional online giving options were entirely appropriate and would help make saving easier.
Two web-based companies, Gift of College and Grad Save, are among the most active providers of college savings gift cards. Both have online gifting systems that let you make donations to a youngster’s new or existing 529 college savings plan, or even a Coverdell education savings account.
At Gift of College, for example, parents create an online profile, which can also be shared through social media with potential gift-givers. Contributors can then send a customized gift card to the recipient — either electronically or an actual piece of plastic — and those funds can then be added to a college savings account. The gifting program is free.
Gift of College is ramping up its program, and its gift cards are expected to be available soon at Gyft, the mobile wallet company, along with Target and other retailers.
“We’re tying to make saving for college convenient, cool and top-of-mind,” said Wayne Weber, the company’s founder and chief executive.
Weber said Gift of College’s cards can also be redeemed to pay off student loans held by some loan servicing companies.
Gift cards are among a host of online tools and services that promise to make it hassle-free to contribute to a 529 account or other education-based products. If you are looking for college-savings gifts that will last well beyond this holiday season, here are a few more ideas:
A College Savings Bank, which manages several state 529 plans, offers an online social gifting feature. For example, account holders can use Facebook to connect friends and family members to a customized page where they can make a gift. Contributions are made online and account holders can track the gifts.
College Saving Bank started the program a year ago, but has already seen a doubling in gift amounts to an average of $815.
A Oppenheimer Funds recently launched an electronic gifting option for several tax-advantaged 529 accounts it manages. Gift givers can download and print out a coupon and a customized greeting card that can be filled out and mailed to the college account holder or beneficiary.
A Fidelity Investments also has gotten savvier about using social media to attract college savings funds to its 529 programs. Using Fidelity’s gift services, account holders can invite family and friends to a personalized college gifting page through Face-book and Twitter or by sending a direct link. Once there, you'll see a child’s photo, including a quote on the child’s dream of the future.
With all these options, there are federal gift tax considerations to keep in mind. Also, many states provide a state income tax deduction or credit for 529 contributions.
While a college savings gift this holiday season might not stack up well to Star Wars toys in the eyes of your 8-year-old, I think I know which gift will be more meaningful and memorable down the road.