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Posted by MarketWatch on December 8,2014 by Liz Moyer

The red sweater might be a good fit for your nephew. The flat-screen television would probably look great in your daughter’s living room.

But here is something to keep in mind as you draw up your holiday list: Sometimes money is the most appropriate present.

Done right, it can also be thoughtful. Financial gifts can launch a child on a lifetime of good habits, help a student graduate without heavy debt, ease the strain of an unexpected medical bill or bolster a loved one’s retirement account.

“A sensible gift can teach children about the power of savings and self-discipline as well as philanthropy, with returns that can long outlast toy or gadget fads,” says Timothy Speiss, a partner in charge of the wealth-advisory group at EisnerAmper, an accounting firm based in New York.

Giving also can be nearly as good as receiving, thanks to the tax benefits associated with some financial gifts. The givers can often reduce their tax bills by, for example, shifting income-producing investments to family members who pay taxes at lower rates or taking deductions on charitable gifts.

Here is a guide to financial gifts that can provide lasting value to the recipients — and, in some cases, pay off for you as well:

Start small

Great satisfaction can come from giving a child a coveted toy or a life-enhancing experience. But don’t discount the possibility that money can be a memorable gift.

Cash is the simplest form. Internal Revenue Service rules currently allow individuals to give up to $14,000 to someone else each year without any gift-tax implications.

Cynthia Conway and her husband give cash gifts at the holidays to their son, who is in high school, and their daughter, a college junior. Conway’s daughter is thinking about putting this year’s gift and some other savings toward buying a car, while her son is in “strong saving mode” because he wants some spending money when he goes to college.

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