The Do’s and Don’ts of Financial Gift Giving

by Redeeming Riches on April 1, 2013

When looking for the perfect gift for the relative who has everything, there are most likely very few things that have crossed your mind. You most likely considered cash or gift cards, but knew that the enjoyment of the gift would be gone the second it was spent. You want to give them something useful, but you want it to last more than five minutes without burning a hole in their pocket; what should you do?

This year when you get to the point on your list where these relatives’ names dwell, consider giving one of six different types of investments. With these ideas, you don’t have to spend a lot to give something wonderful; and like all investments, these gifts keep giving for years to come- or until the receiver chooses to cash them in to have some fun.

Savings Plan Contributions

If you have a young relative who is saving up for college, contributing to their 529 College Fund is an excellent way to show you care about them now, and you care about their future. You will most likely need to know the type of 529 being used, as well as the social security number of the beneficiary; but you can most likely get this information out of one of their parents, who will be more than thrilled by your gift idea.

Savings Bonds

These are the easiest of all financial gifts to buy and give. Savings bonds (also known as I-bonds) will continue to rise in value- even with inflation. Paper certificates can be presented as gifts, while the bonds are actually stored electronically by

ETF Shares

If you want to go a little bit bigger than a savings bond, consider presenting your relatives with an exchange-traded fund and buy shares for them. This mutual fund trades as a typical stock. You can purchase ETF shares with your own accounts and then give them away to someone else.

ETFs cannot be given to minors for current use, but can be sorted into UTMA or UGMA accounts where they will be stored until the minor is of age. “Of age” can be either 18 or 21 years of age, depending on the state of residence. If gifted to a child, ETFs in a UGMA will be taxed at 0%, the child’s rate, so the minor will not have to worry about owing money to the government at tax time, thanks to a gift.

Individual Stocks

It’s an expensive option, but it may be the right choice for the right loved one: an individual stock. Online services offer the option to send a paper stock certificate to a loved one to show proof of ownership of a share from a reliable company. The service itself costs equally as much as the share itself, so unless you are looking to literally throw money away on a gift, this is most likely not the option you want to take.

Finance Books

An equally terrible idea as the one above is the presenting of a personal finance book as a present. Though it is an Ideal gift for a graduate or a friend/sibling just starting out in the world, you may want to keep this advice to yourself, lest you become the family financial know-it-all.

Give For The Sake Of Love

No matter which option you choose, the fact that you gave a gift from the heart that shows you not only care about your friend or family member in the current moment, but that you also care about their successful financial future will mean a lot; and if you don’t want to give them anything financial in nature directly, you could always donate money in their name to their favorite charity. Happy gift giving!

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