Instead of the latest toy or gadget, some people are trying to give their loved ones more financial security this holiday season.
While it’s long been possible to hand out cash, buy stock or contribute to college savings plans, financial institutions and retailers are making it easier to bestow a gift with lasting value.
Among them is Stockpile, a US company that sells gift cards that can be redeemed for stock, which is rolling its products out to more than 14,000 US stores this holiday season after seeing success at other retailers. College savings plan administrators, which see contributions peak at the holidays, have been adding new ways to donate.
Financial gifts can be tricky, though — givers need to be aware of social implications.
Ann Coulsen, an assistant professor at Kansas State’s Institute of Personal Financial Planning, called such gifts a “wonderful and practical idea.” But a recipient who wants something “now” might not appreciate it, she said. It may take some explanation of how stocks or savings plans work. And if money causes resentment within a family, it may not be worth it.
Here’s a look at the ins and outs of some popular financial gifts:
1. Cash
Cash is easy to get and easy to give, but it doesn’t build value the way other options do. For a large gift you may want to consider taking that cash and putting it in a mutual fund or other longer-term investment.
2. College savings
A popular suggestion by financial planners for gifts to young children is contributing to a college savings plan.
Craig Larson, of Apple Valley, Minnesota, welcomed his first grandchild a few months ago and is planning to open a college savings account for her this Christmas.
“I’ve already spoiled this poor little girl to death,” he said. “This is something tangible that is not going to end up under the bed or lost at the beach, and she’ll be able to see it growing.”
3. Student loan payments
The average debt at graduation for a US bachelor’s degree was $35,000 (Dh128,527) last year, so a worthwhile gift for many young people may be helping pay that down. A cheque will suffice or you can pay the lender directly.
4. Stock
Giving stock is a way to encourage an interest in investing over the long term.
The giver may avoid the capital gain consequences of cashing in the shares themselves. But the implications for the recipient are tricky depending on their age, the value of the stock and more — so it may be worth consulting a professional.
Stockpile allows someone to buy a gift card for a dollar amount worth of stock, rather than the price for a share. Purchases can be as small as $1. Putting it in gift-card form makes it easier to give stock as a gift, says Dan Schatt, chief commercial officer of Stockpile.
The bulk of Stockpile’s customers are people giving gifts to a younger generation — about half of its account holders are under 30. But many companies also buy stock as gifts for employees.
“It’s such a society where you are consuming and buying, here is something that is going to last, potentially multiple generations,” Schatt said.
