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The holiday season is still a couple of months away, but planning for things in advance is never a bad idea.
For most people, holiday gift-giving is mostly about consuming, splurging, and gifting things that make the other person feel good.
But we are the people who love personal finance, and we like to look at everything from a financial perspective. We understand that finance and investment-related gifts are a great and practical idea to actually help your loved ones.
While some people might think that thinking about gifts from an investment perspective “ruins the spirit of festivals,” just think about how much your friends will appreciate it when they’ll see your gift growing their wealth in the future.
Financial gifts are also an amazing idea for your children if you want to teach them the importance of finance and investing.
And believe me, you need not be an investment expert or a personal finance guru to be able to select the perfect gift. You just need to read this blog.
Today, we’re talking about the five best investment oriented holiday gift ideas that are actually financially beneficial for the recipient and make your gift stand out.
Best Financial Holiday Gift Ideas
The qualities of a good financial gift are: It is financially beneficial to the recipient, it is relatively safe, it is easily shareable or giftable, and it doesn’t cost you an arm and a leg.
The list we’re presenting in front of you is curated, keeping in mind all these qualities. So any gift you select from here is the best. Let’s begin the list from backward.
5. Treasury Bonds and Certificates of Deposit
Starting off the list are Treasury bonds and certificates of deposit. For a very long time, T-bonds and certificates of deposit have been a traditional gift, especially for newborns and children.
These instruments of investment are generally considered safe and serve as a safe way to preserve capital while slowly growing your money, which is also the reason they’re traditionally popular as a gift.
Because the interest rate tends to be low on T-bills and CDs, and they can’t usually be redeemed for years or even decades, they may not be the most exciting gifts out there.
But if you’re looking for a safe way to put money aside for a child, and you don’t anticipate them to need it for a long time, then T-bonds and certificates of deposit may be the way to go.
You can easily buy Treasury bonds directly from the US government on its official website TreasuryDirect.gov. Additionally, you can buy them with a brokerage account as well.
One benefit of buying them from the Treasury Direct website is you can directly buy them as a gift, provided the recipient also has a treasury direct account.
On the other hand, Certificates of deposit are available and purchased commonly through banks, credit unions, or similar financial institutions. They can also be purchased with a brokerage account.
Stocks are a great and exciting gift, which can also prove to be a practical idea to get a young person interested in personal finance.
There are multiple benefits of gifting stocks. They don’t cost a lot of money, you can literally buy one or two of them, that too of different companies, and they are high-growth assets that can grow your money fast.
Stocks are a popular gift, especially for teenagers, because it is a wonderful way to begin a conversation around investing and how the stock market works.
The downside with gifting stocks is they’re not considered as safe as T-bonds or CDs. And they need to be actively managed, thus, require attention from the holder.
Most brokerage accounts will let you purchase shares for another person, but if you want to make it a little bit more festive, then there are companies such as give a share and stockpile that lets you give your stock in the form of gift cards or certificate.
So if you’re planning to gift stocks to your kids or teens, then stocks in the form of a gift card or certificate will be much more appealing to them.
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3. College Savings Plan
Our third top financial holiday gift idea is a college savings plan. These include the 529 plans and the Coverdell accounts.
Both of these plans allow you to create a fund that lets your capital and interest be withdrawn tax-free, as long as the money is used for educational purposes.
These educational purposes include college, grad school, expenses to study abroad, and they even include k-12 private school tuition.
The biggest difference between a 529 plan and a Coverdell account is that a 529 plan typically invests your money for you in funds that get more conservative as the recipient gets closer to college-age, while the Coverdell gives you the freedom to invest in whatever you want, including stocks, mutual funds, bonds, etc.
Other differences include age restrictions, contribution limits, and tax advantages. You don’t need to get confused here because both are great ways to help a child save for college or graduate school. If interested, you can see a detailed comparison between the two here.
A college savings plan can be the best gift you can give to your children because they’ll surely appreciate it when they get older.
Also, if the child is old enough, you can get them on board by showing them what you’ve invested in and explaining why.
Also Read: How to Change Your Life in 2021
2. Roth IRA
The second position on the list of best holiday gift ideas is something that might be surprising to a lot of people because we don’t usually think about setting up retirement plans for children.
But remember the magic of compound interest? If your children are in their teenage years, then setting up an IRA for them can give them a 5 to 10 years head start, which could literally translate into many more thousands in their retirement account.
Now, if you’re trying to set up a Roth IRA for a child, there’s a catch. The catch is that in order to qualify for a Roth IRA, a child has to be earning money of their own.
However, paper routes and babysitting money counts. So just be sure that you or your child are keeping careful track of how much they are earning, and you can contribute up to the amount of their earnings per year or $6,000, whichever is less.
The advantage of a Roth IRA is that it allows you to invest in your choice of stocks, bonds, and mutual funds. So again, this can be a great way to get older children involved by explaining to them how you chose your allocations, and maybe even letting them pick a stock or two for the fund and show them how your money can grow.
1. Financial Education
Surprise! The first position is not a financial instrument or an asset that you can invest in, but still, it is the best financial holiday gift idea we can give to anyone.
It is like instead of giving them a fish every holiday, you can teach them how to catch a fish, so they’re never dependent on you or anybody else again.
Financial education has recently become a way that many banks and brokers like TD Ameritrade attract new customers.
Which is great, but one thing that you want to keep in mind is that these brokers have an alternative motive, and that is to keep your money in their brokerage account so that you invest it in stuff that makes cents to them.
The point is that not all financial education is created equal. So when you’re out there looking for financial education gifts, make sure to look for stuff that is unbiased and created keeping in mind your best interest, not someone else’s.
Spending money on financial education is not actually spending, but rather an investment in itself.
It is a gift that you can give to yourself, if not somebody else because there’s nothing better than gifting yourself something that’ll help you become a better version of yourself.
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