The holiday season is quickly approaching, so most people are starting to think about gifts to buy for their loved ones. But with inflation, the typical presents are more expensive than ever. For this reason, investments become an appealing alternative to a tangible gift.
Why Give an Investment?
Investments are now a smart gift idea, with inflation being a driving factor. Nowadays, your money won’t go as far with tangible gifts as it has in the past. With an investment, your gift will likely continue to grow with inflation. This reduces the impact of inflation, regardless of how the recipient eventually decides to spend the money. Depending on the stock and the recipient’s age, your gift may even grow exponentially before they use it.
But even in the years without high inflation, giving an investment was already a great idea. It helps teach younger recipients financial responsibility and the basics of investing, including compounding. And if your gift recipients are older, they will likely appreciate the investment as a way to grow their wealth and plan for their future..
How to Give an Investment
Once you decide to give your loved ones an investment instead of a tangible gift, here’s how you can go about it.
Gift a Stock
A simple way to gift an investment is to directly give the person a stock. With modern stock exchanges, you may even be able to do this via your brokerage account. If the gift recipient already has a brokerage account, it will be easy.
You can include a card or promissory message in the meantime, then start the process of moving the stock.
Set Up Custodial Accounts for Younger Recipients
What about gift recipients who are too young to invest in stocks themselves? Create a custodial brokerage account for them. Just try to opt for stocks with minimal interest or capital gains, as there is a “kiddie tax” on children’s unearned income over $2,300.
Gift Other Investments
Stocks are far from the only investments you can give as gifts. You can also contribute to educational plans, buy savings bonds and mutual funds, or add to savings or retirement accounts.
Be Aware of the Gift Tax
Depending on the size of the investment you gift, keep the gift tax in mind. For 2022, the gift tax exclusion limit is $16,000, which shouldn’t be a concern for most people.
Conclusion
If you are struggling to come up with a meaningful gift idea, consider giving an investment. Whether you contribute to a retirement or savings account or gift a stock, bond, or mutual fund, an investment is a great way to contribute to the financial future of your loved ones.
