This holiday season, instead of giving a gift that will be broken or forgotten by Valentine’s Day, provide your loved ones with a long-term investment opportunity. These sorts of gifts are perfect for young people who are looking to generate funds for their education or their first house. A few options are available, and they make excellent gifts.
Bonds are the classic gift for children, but the time of the paper bond that you could put in a box has long since passed. In 2012, the U.S. Treasury discontinued paper bonds in favor of a digital version. Also, you have to go through the U.S. Treasury Department’s website and have the recipient set up an account in his or her name instead of just buying the bonds. It’s an arduous process. Combine that difficulty with the relatively low interest rate bonds earn, and bonds might not be the best gift choice anymore.
Stocks are another common long-term investment gift. While most shares are traded electronically, you can still obtain stock certificates you can frame and wrap. Traditionally, people buy stocks of established blue chip companies, such as Disney or Walgreen’s. Using a blue chip stock minimizes the risk of a decline in value and can promise some sizable returns. If you want to make the gift truly special, cater the stock to the recipient’s interest. Does she love Star Wars? Gift her Disney shares. Big fan of tech? Some shares in Apple could go far. Here are some of the best online investing sites you can use to help you learn about investing.
For the student who is looking for some help with education costs, 529 accounts are the gift to give. A 529 account allows individuals to invest money for education tax free. All interest and gains on the stocks or bonds within the account are not taxed if the proceeds are used for an educational purpose. When acquiring an account, consult with a licensed broker to ensure you satisfy all necessary tax ordinances and rules.
If you’re still unsure about 529 plans, take a look at our overview of how to use a 529 plan efficiently.
When you make a gift, be aware of the relevant gift tax implications that might follow. The gift tax is assessed on a per-person basis. You can make a gift valued up to a certain threshold to any individual without triggering a tax. As of 2015, the annual threshold was $14,000. If you have three grandchildren, you could give each child $14,000 worth of gifts without being taxed. If you are married, your partner can give an additional $14,000 to each child.
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