Cash Gift Guide
Gift-giving occasions are a call for celebration, but selecting the right gift can be the source of much frustration and uncertainty. Cash is one gift option that's easy to give and even easier to receive, but it can also be the source of new problems. Giving cash is only appropriate in the right situations, and gift givers still need to consider the recipient and circumstances.
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Advantages
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A gift of cash has several advantages. It is universally accepted, meaning the recipient can spend it anywhere or deposit it into an account. Cash is also small and easy to store or ship. Children and young recipients may respond more to a card containing cash than one that includes a check, money order or gift card. Finally, cash is easy to acquire from an ATM, a bank or a retail store using a cash-back debit.
Drawbacks
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Cash is not the best gift option in all situations. It prevents the giver from hiding the cost of the gift. Since the amount is obvious, this raises the possibility that the recipient will feel that it is too much or too little. Cash may also seem impersonal, suggesting that the giver is unwilling or unable to shop for what some might consider a more thoughtful gift.
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Security
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One important issue to consider when giving a cash gift is security. Lost cash is difficult to recover. Even something as simple as an envelope lost in the mail can result in a total loss. The U.S. Postal Service discourages sending cash through the mail due to security concerns. Once the recipient has the cash, the risk of loss or theft continues.
Considerations
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Giving cash as a gift may create a tax liability for the giver. The IRS provides a gift exclusion, which applies to cash gifts. Gifts below this amount are not taxed, but larger gifts require the giver to report the gift on that year's tax return. Since 2009, the gift tax exemption has been set at $13,000 per year, before which it was $12,000. Cash gifts below these amounts don't require reporting or tax payment.
Alternatives
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Instead of giving a cash gift, givers should at least consider some of the alternatives. Personal checks are more secure but have the same value as cash and, for recipients with bank accounts, are easy to turn into cash for spending. Cash cards, which most major credit card companies offer for a fee, are available in a wide range of amounts and are replaceable if lost or stolen. Gift cards are also more secure but only work with specific merchants.
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References
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