The Very Best Last-Minute Gift for a Kid

Your kids or grandkids might want a hoverboard or a video game this Christmas. But if you haven’t gotten them one by now, it’s probably a little late for that. How about a last-minute gift of stock? Sure, it doesn’t come in a big box, and the thank you will probably be rather perfunctory. But in the long run, it’s going to be better for them than some toy that will be forgotten by February. Here are six reasons stocks are a great gift.

1. Financial literacy

Financial literacy is generally not something taught in schools, but it’s critically important. Stocks, even a single share, make the lesson tangible: A kid who owns a share of Coca-Cola can look at a soda fountain in a whole new way. Giving shares in a company can open up a discussion on how markets work and on understanding, in very real terms, that something is only worth as much as someone else is willing to pay for it. Your newspaper (if you still get a print edition) might not run stock tables anymore, but you can show the kids how to look up the value of the shares you gave them and teach them how to track an investment over time. Older kids might even be ready for lessons on more advanced concepts like dividends and price-to-earnings ratios.

2. Save on taxes

Instead of buying shares from a broker, you can give shares you already own. Depending on your tax bracket, and that of the person receiving the shares, they may be taxed at a lower rate when the recipient decides to sell. This can be very handy if, for example, you were planning to sell stock to help pay for college. Giving the stock to the student and letting them sell it could mean less paid in taxes and more money for tuition. There are some conditions on this, and tax laws are always changing, so be sure to check with an accountant or financial adviser first.

3. Delayed gratification

Warren Buffett famously says that he buys stocks that he wants to hold forever (OK, I’m paraphrasing here). Giving a stock to a child can show them the value of holding onto something before claiming the reward. As they watch the value rise, they’ll understand why it can be better to wait and take the earnings later. Of course, sometimes, stock values fall, and they’ll wish they had sold. In that case, reframe it as a lesson on when to cut your losses.

4. They can be better than bonds

Yes, there’s some inherent risk in stocks. The company could go under, and your loved one is left with nothing more than a piece of paper. But a bond left in a drawer somewhere and forgotten is nearly as useless. And the bond will, at some point, stop appreciating in value. If you stick with blue-chip companies, the potential returns could be much higher, and the shares will sometimes generate dividends. You may even consider a dividend reinvestment program (sometimes known as a DRIP). Even a single share can be placed into this sort of program, where dividends are used to buy additional shares in the company. A couple of years ago, someone found that a single, $40 share of Coca-Cola bought in 1919, would have been worth $9.8 million in 2012, had all the dividends been re-invested. This feat is not easily repeated (and you need to wait 90-odd years), but you won’t see that kind of return from a bond.

5. Don’t forget index funds

You could give a single share in a single company, but why not give a share in an index fund? If you’re looking to teach them about stocks as a concept, a single company may be easier for them to wrap their heads around. But if you’re looking to help them build a college fund or nest egg, index funds can often end up with a better return. Also, depending on the index, the kids now have a reason to track dozens or even hundreds of different companies, instead of just one.

6. It could seed a larger gift

That first share can sometimes be all you need to set up a small investment account or trust. From there, it’s easy for you to put more shares (or cash or other gifts) into the account. You might even structure it to allow the child to do a little investing of his or her own, with parental supervision, of course. And if this is last-minute, don’t worry if you don’t have time to get the account documents in order before giving the gifts, you can always do that later, before or after Jan. 1, depending on your tax situation.

Would you consider the gift of shares for your children or grandchildren? Share with us in comments below or on our Facebook page.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
The Most Common Reason That Older Adults Fall Down
The Most Common Reason That Older Adults Fall Down

The good news: It’s possible to avoid potentially devastating falls.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

11 Home Upgrades With the Best Payback in 2020
11 Home Upgrades With the Best Payback in 2020

The home remodeling projects that deliver the best bang for the buck tend to have one thing in common.

7 Surprising Things That Damage Your Credit Score
7 Surprising Things That Damage Your Credit Score

A seemingly small stumble can cause your credit score to plummet.

Big-Ticket Things You Should Never Buy
Big-Ticket Things You Should Never Buy

In this week’s podcast: Are you wasting big money on these common purchases?

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

This Is the Cheapest Place to Buy a Used Car
This Is the Cheapest Place to Buy a Used Car

Looking for a good deal on a set of wheels? This should be your first stop.

10 Things That Really Are Free on Amazon
10 Things That Really Are Free on Amazon

These freebies are available to anyone — no Prime membership necessary.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

11 Disgusting Household Items You Should Toss Already
11 Disgusting Household Items You Should Toss Already

Never keep these items past their prime.

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

10 Surprising Foods You Can Freeze — and How I Freeze Them
10 Surprising Foods You Can Freeze — and How I Freeze Them

How many of the foods have you thought to put in the freezer?

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.