If you’re looking for great prices on holiday gifts this year, skip the mall and head to the stock market.
The deals are real and long after the toys are broken and the clothes stained, faded and outgrown, your gift will keep on giving.
This is not encouragement to be plowing into stocks during a down year in the market; investors should make those investment decisions based on their portfolio, financial plans and goals, and feelings about the market.
But gifts of stock should be hot this year, because the stock market has put them on sale, giving them greater long-term potential. Plus, they are never the wrong size.
It’s not just one of my favorite gift ideas, it’s also one of my greatest personal financial success stories, because I started giving my daughters stock as soon as they had Social Security numbers.
My girls were born in the early 1990s; gifts of stock were hard to do then.
A few hundred dollars wouldn’t buy the 100-share “round lot” needed to get reduced commissions. Discount brokerages — which started in the mid-1970s — weren’t adept at helping the microinvestor, someone dribbling small amounts into an account for years.
Mutual funds were a potential alternative, but they didn’t offer the lessons that stocks do about ownership, controlling assets you believe are valuable and more.
A kid can understand that they like McDonald’s and might want to own it; they don’t get that context from an index fund with dozens or hundreds of securities.
Until the kids were old enough to appreciate what was inside a box — rather than the act of ripping wrapping paper and having a new doodad — I let the grandparents buy the presents while I enriched their future.
As the children grew and needed something more tangible and immediate from me, I spent more on typical gifts and socked less away in their portfolios, but I still set aside a few hundred dollars each year.
Through regular conversations about their mini-portfolios, my children learned about investing, compounding, dividends, the time value of money and much more.
By the time they were 10, my kids could talk stocks in rudimentary ways. They discussed reasons to buy a company and got involved in decisions of whether to add to an existing holding or put something new in the portfolio.
The girls also knew that this was their money, to use on whatever they wanted as an adult; my promise was to make contributions until they turned 21 and took over account management for themselves.
Now 31 and 29, the girls have seen the benefits of long-term investing and mostly want to leave the money in place and working for them.
Mission accomplished.
Today, gifts of stock are easy, which is precisely why it should be a staple for anyone looking to raise money-savvy children or grandchildren.
There are any number of apps that let investors trade small dollar amounts in fractional shares, and programs like “Stock Slices” from Charles Schwab & Co., “Stocks by the Slice” from Fidelity Investments or other plans from traditional brokerages.
Simply pick a favorite company or two and a dollar amount (as little as $1, depending on the brokerage/app involved), set up a “gifts to minors” account and you’re off.
It’s ideal for grandparents or parents wanting to teach lifelong lessons about money and investing.
For my children, I wanted companies they’d recognize and understand; we talked about owning McDonald’s — and not Burger King — and how we benefited as shareholders when someone made the decision to go to Mickey D’s rather than its competitors.
They moved from toymakers and food companies to computer firms and electronics manufacturers as their interests changed.
On their 21st birthdays, each of my girls took full control of their portfolio; both had more than $20,000, pretty good for just a few hundred dollars set aside each year.
That money was the accumulated value of holiday and birthday gifts not given, the monetary worth of the things that never wound up in the basket of old toys, the pile of under- and unappreciated “shows of love” or stuff that broke or was played out on a journey that ended at the town dump.
Meanwhile, those portfolios continue to be managed conservatively; my children have scarcely touched the money, in part because they like the freedom it gives them.
When my older daughter took a new job halfway across the country this year, she told me that the portfolio gave her the courage to make the move, knowing that if things didn’t work out with the radical job change she was pursuing, she wouldn’t be left broke and scrambling.
The girls have said the entire growing-up-with-investments experience — from having the accounts to talking about how to manage them — has made them the envy of friends and schoolmates.
My only regret is that I wasn’t more frugal on the holiday spending, so that I could have made larger set-asides to give them an even better start.
I won’t make the same mistake with my future grandchildren, but there’s no reason for anyone to have a similar problem now.
If you are afraid to do this because you don’t know investments, this is your chance to learn about them together.
If your child/grandchild has shown interest in a certain subject or career, investments can help foster that.
Be creative; there’s almost no limit to what you can offer your children with a few dollars in shares.
But take advantage of the tools that now exist to give your family a leg up on its financial future. There’s no bad move, no wrong investment; even losses teach lessons.
And take advantage of a market that has marked down stocks by about 15% this year. In a year when there aren’t many cost-sensitive, money-savvy deals to be had, stocks as gifts are a bargain.
