Are you headed to a bar mitzvah or bat mitzvah and wondering about the appropriate bar mitzvah gift amount? For adult guests, figuring out an appropriate bar mitzvah gift amount is a reasonably low-stakes money question. By the time you’ve paid taxes for a decade, deciding how much cash to put in a card may not be daunting. For young people, every money question has more weight. A tween or teen going to a friend’s bar mitzvah might have no idea how much to give as a gift or if cash is right. After all, teenagers are constantly running into brand-new financial challenges they have no experience navigating. From choosing the right bar mitzvah gift amount to learning how to manage and invest their own money, teens need and deserve a lot of guidance from the adults around them. We have some straightforward answers to questions about bar mitzvah gifts. If your household includes kids, read on for ideas to start other meaningful conversations around money. CHOOSING AN APPROPRIATE BAR MITZVAH GIFT AMOUNT With most money-giving occasions, you might pick a round number like $100 or $500 to put on the check. For a bar or bat mitzvah, it’s standard to give an amount that’s a multiple of 18. In Jewish tradition, 18 symbolizes “chai,” Hebrew for “life.” Giving an amount that’s a multiple of 18 is a way of symbolically gifting a long and happy life to the young person of honor. HOW MUCH SHOULD A KID GIVE AS A BAR MITZVAH GIFT AMOUNT? For a teen attending a peer’s bar or bat mitzvah, $36, $54, or $72 are all typical bar mitzvah gift amounts. Exactly how much a young person decides to give will generally reflect their financial means and how close they are to the guest of honor. Even $18, or a small non-cash gift, is acceptable from a young guest.
HOW MUCH SHOULD AN ADULT GIVE AS A BAR MITZVAH GIFT AMOUNT?
For adult guests trying to determine an appropriate bar mitzvah gift amount, one helpful rule of thumb is to consider what you would spend on an ordinary birthday gift and multiply that by 1.5. That might mean giving $250 to $500 per person for a close relative or somewhere between $100 and $200 per person for the child of an acquaintance—always rounding up to the nearest multiple of 18, of course.
SHOULD I ALWAYS GIVE CASH FOR A BAR MITZVAH GIFT?
Nope! Tucking cash into the card isn’t the only way to appropriately acknowledge this important milestone. Another way to honor the bar or bat mitzvah of a relative or close loved one is to contribute to a 529 plan or other investment account in the child’s name if the parents have established one. (In some instances, taxpayers may deduct their 529 contributions to minimize their tax burden—talk to your tax planner to determine the most tax-advantaged way to make a significant bar mitzvah gift. Don’t worry about gift taxes unless you’re giving a substantial gift of $18,000 or more.)
Donating in their honor is an increasingly popular way to recognize a bar or bat mitzvah. If the guest of honor doesn’t have a favorite cause or charity, one option is to donate to their school or an organization they belong to. Or, discreetly ask the parents for a recommendation. If you want to make a significant gift, you could even consider donating tax-advantaged assets like appreciated stocks to a charity in honor of the birthday kid.
MORE MONEY QUESTIONS FOR YOUNG PEOPLE
When kids start earning and handling their money (like birthday gifts or summer job earnings), it’s time to start having meaningful conversations about money. There are a lot of money questions that young people should be asking and conversations that should be happening in any family with teens or young adults.
Those conversations don’t all have to happen at once, though. Helping young people develop financial literacy and build good money management skills should be an ongoing process. If those aren’t things your family has already discussed, now’s the time to start. Here are some questions to use as a jumping-off point.
PRACTICAL MONEY QUESTIONS FOR YOUNG PEOPLE
What kind of accounts can I open? Until the age of 18, a minor needs an adult’s help to open most financial accounts. There are still plenty of options available. In addition to basic savings accounts, teens can contribute to their education savings accounts to save for college and other future pursuits. Minors can even contribute to their IRAs. State laws affect how minors can use certain accounts, so parents should speak to a financial planner about the best way to help their kids save.
How does compound interest work? Helping a kid understand the power of compound interest is one of the best financial lessons you can share. Parents can use the ten vs. 30 principle to illustrate the power of compound interest. Our video about the ten vs. 30 principle demonstrates how one worker who invests $60,000 over ten years can end up with more money at 65 than someone who invests $180,000 over 30 years. By investing early in her career, the first worker gives her money time to grow and for interest to be compounded. That’s a pretty impactful example to share with a young person with so much time to maximize compound interest.
What should I know about taxes? As soon as you start earning an income, you start owing taxes—so even teens with their first jobs need to understand how taxes work. Young people should know how much will be deducted from each paycheck for taxes, whether or not they need to file tax returns and how tax brackets work. There’s much more for young people to know about taxes as they start working and earning more money, but these are good questions.
PERSONAL MONEY QUESTIONS FOR YOUNG PEOPLE
What’s the best way to invest my money? Kids are never too young to learn about the basics of investing! Teenagers might keep all their money in a savings account for now, but growing their money through investments could also be an option. A parent or guardian opening a custodial account and managing it until the child turns 18 can start children investing.
Young working adults should focus on accumulating savings first, then invest in a traditional or Roth IRA and explore other investment options. Stocks may appeal to some young investors, too. If they take a risk and invest in a stock that tanks, they have decades left to recover. And if they invest wisely, who knows, maybe they’ll be able to retire by 30.
What are some money mistakes I should avoid? Too many young people learn the hard way about the crushing burden of credit card debt. Any young person getting their first credit card should understand how credit card interest accumulates and how carrying significant debt can lower your credit score. (It’s also essential to understand how using credit cards responsibly can help you build credit.)
Taking on too much student loan debt can also be a financial burden that follows young people into their 30s and beyond. Paying for college is a conversation that should involve the student, their parents and the family financial planner.
Failing to budget is another widespread money mistake for young people. When you know exactly how much money you have and how much your expenses are, it becomes harder to justify the impulse buys that drain so many people’s accounts.
PHILOSOPHICAL AND ETHICAL MONEY QUESTIONS FOR YOUNG PEOPLE
How do I differentiate between “want” and “need”?
Thinking consciously about the difference between want and need is a significant step toward becoming a financially responsible adult. This topic closely relates to budgeting, so it’s an essential conversation once teens start earning money and being responsible for their bills.
How do I feel about spending, saving, and giving?
Our financial philosophies may change as we age, but it’s never too early for kids to start thinking about how they want to allocate their money. Talk about how much money you want to keep in savings at a minimum. After you’ve budgeted for must-haves each month, how do you want to use any leftover money? What’s the most money you would be comfortable spending on an impulse item?
What are my most important priorities, and how will my financial future support them?
When teenagers think about their college and career goals, money must be factored into those plans. How do you pay for college? How does money fit into your biggest goals for your life? If one teen feels wealth is a top life goal, that will shape their educational and career choices. If another hopes to be a school art teacher who spends summers volunteering, they may need to be more prudent regarding lifestyle choices. Parents can provide practical support by talking kids through the realities of their expenses and earnings in different scenarios.
NEED HELP ANSWERING MONEY QUESTIONS FOR YOUNG PEOPLE?
At Sachetta, we know that protecting your loved ones is at the heart of everything you do. For anyone with young people in their family, preparing them to be financially independent is a big responsibility. As you work on giving your kids the tools they need to make good choices around money, we’re always here to help and advise—on anything from bar mitzvah gift amounts to the best ways to save for college.
Do you have any questions about financial planning and money management for young people? Contact me today!
Michael J Callahan, CPA, CFP®, MST, and CEO is a Certified Financial Planner™ practitioner, Certified Public Accountant, and holds a Master’s Degree in Taxation from Bentley University. Mike has been involved in personal financial planning, as well as both business and individual taxation for more than 15 years.
