Gifts That Keep on Giving: Investment Ideas for the Holidays
The holidays are upon us and most of us are thinking about gifts for our loved ones. A gift idea that you may not have considered, but one that can add huge value to the receiver, is an investment opportunity.
An investment gives a lot of long-term benefits that most gifts can’t offer. However, before choosing which investment to give, you should think carefully about what is most appropriate for the receiver. The age of your recipient will have an impact, so too will their level of financial literacy. Investments can also come with tax implications for both the giver and receiver that you should factor into your planning.
Your wealth advisor can help guide you through the process of deciding. To get you started, we’ve pulled together a list of potential investment gift options for your loved ones this holiday season.
6 Investment Gift Ideas for the Holidays
1. Stocks and Shares
If you want to give an investment to someone who doesn’t have any currently, a straightforward “entry-level” option would be to give them stocks or shares to an organization. The great thing about this is that you can choose a company that they admire or believe in.
Gifting stocks or shares means giving a gift with long-term benefits as it has the potential to grow in value over time. The person who received this gift can also learn important financial knowledge by holding this asset.
The only downside to stocks is that they can be risky and this is something you’ll want to take into consideration when deciding if it’s the right gift for your recipient.
2. Mutual Funds
Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, and other assets. These assets are managed by a professional. Giving a mutual fund as a gift allows the recipient to benefit from professional portfolio management and they can learn a lot about financial markets if they show interest.
The other great thing about mutual funds is that they are diversified, which brings down the overall risk. You can also gift mutual fund investments to minors by setting up a custodial account in their name and acting as a guardian.
3. Certificates of Deposit (CDs)
Certificates of Deposit are basically savings accounts that offer a higher rate of interest on the condition that you leave a lump sum over a fixed period of time. They offer a low-risk investment option and can give the recipient a steady stream of interest over time.
However, CDs can only be gifted to minors. This is because in order to get a CD the account owner needs to verify their identity and you cannot do this on behalf of another adult. You can however have a custodial account in the minor's name. The CD will then transfer over to the minor when they reach adulthood.
4. Savings Bonds
U.S. Savings Bonds are government-backed securities that provide compound interest over time. They can be a safe and reliable long-term investment while also serving as an educational tool, teaching recipients about the principles of saving and investing.
These bonds are purchased via TreasuryDirect which is a U.S. government website and are an affordable option as they can be purchased from as low as $25.
Just like CDs, when buying savings bonds for minors, you will remain the custodian until they reach adulthood at which time they can become the sole owner of their savings bonds.
4. 529 College Savings Plans
Contributing to a college savings plan on behalf of your loved one is a way to set them up for a more financially sound future in which they have funds to cover educational expenses. This can be a particularly great option if you’re looking for a gift for children, grandchildren, or nieces and nephews.
A 529 college savings plan is a great place to contribute funds as they can grow tax-free overtime. Then, when the time comes to make use of the funds for qualifying educational purposes, withdrawals can be made tax-free without penalty. As the giver of the 529 contribution, you may also receive tax benefits. In addition to this, you don't have to be an account holder or custodian to contribute.
5. Health Savings Account (HSA) Contributions
Another way you can make a gift toward someone's well-being is making a contribution to their HSA if they have one. This can be a tax-advantaged way to help someone cover future medical expenses. If they have current medical expenses, it could be a thoughtful way to alleviate some stress during and beyond the holiday period.
6. Financial Education Resources
Another option that doesn’t involve a tangible monetary investment is to give the gift of financial literacy. This could come in the form of books, courses, or subscriptions to financial education resources. These gifts can empower recipients to make informed investment decisions and as such you invest in their financial future. You can also give these resources in combination with one of the investment opportunities we’ve listed above.
An investment opportunity is an excellent gift for a loved one as it’s a gift that continues to give returns. It’s important however to choose the right investment for the right recipient and this will require research. As we mentioned, there are often tax implications involved in giving and holding investments. So, this is another thing you’ll need to look into.
Your Entrust Wealth Partners advisor is also well-placed to guide you in this decision. They can also help you build gift-giving into your wealth management plan.
Contact your Entrust Wealth Partners advisor or contact our office at (860) 838-3730 to discuss further.