Every year on birthdays and holidays, my nieces and nephews receive a seemingly countless number of toys and clothes. Since they receive so many gifts from other family members, my wife and I decided to take the money we’d usually spend on a present for them and put it into a savings account. When they’re young, we’re sure they won’t notice we didn’t give them a gift to unwrap. When they’re a bit older, we’ll probably buy them something small, but also take the opportunity to explain what we’re doing for them and impress upon them the importance of saving and investing.
We are planning on giving them an equal share of the money in the account on their 18th birthday. We figure they can use the money on things like traveling, college textbooks, or a down payment on a car. Maybe they’ll use it as principal for another investment!
As you prepare to do your holiday shopping this year, consider giving the gift of investment. Here are some ideas:
My wife and I opened a savings account for our nieces and nephews with ING. The process was simple, and the interest rate, while low, is higher than the interest rates we were offered at banks in our neighborhood. Still, as with any other gift, be sure to “shop around” and find a financial institution that offers a competitive interest rate. There are many better ways to invest money, but a savings account is liquid, free or low fee, and allows you to build up money over an extended period of time versus making a one-time purchase or investing a large sum of money up front.
You can give the recipient a card explaining what you’re doing for them, or give them a small monetary gift and explain that the rest of the gift has been saved or invested for them.
Certificates of Deposit (CDs)
CDs usually offer a slightly higher interest rate than savings accounts, but most likely require a higher initial deposit. You must also keep the money in the CD for an agreed amount of time (e.g., 6 months, 12 months, 18 months, etc.) or pay a fee for withdrawing early. You can put the CD in your name, then gift the cash amount once the CD term is over, or put the CD in the name of the recipient.
These are ideal gifts for young kids – or anyone who can wait a long time before receiving the gift – as interest rates get higher the lengthier the CD term.
Savings Bonds can be a neat gift for kids as the physical bond document looks more impressive than cash in an envelope would. More importantly, bonds gain interest unlike cash, and they’re an extremely safe investment.
Consider giving the gift of stock this year. A physical stock certificate can commemorate the purchase: for a fee, sites like OneShare will sell a single share of stock and frame the stock certificate for display. Personalize the gift by buying stock in a company that the recipient is interested in. For example, you can buy a New York Knicks fan stock in Madison Square Garden (whatever you buy, be sure you’re making a sound investment first and foremost).
In addition providing an investment for someone, these gifts can create an opportunity to discuss the importance of investing. Have you ever given an investment as a gift or do you have other ideas for investment gifts? Let us know!