Have you ever had trouble figuring out what to give someone as a gift? I have, probably because when I need to purchase a gift for someone I want it to be something they will like or use. If I buy the first thing I see without putting a lot of thought into the gift, the recipient may not like it or use it and I feel like it was money wasted. Instead, why not give the gift of an investment? It could be a way to give your friend or loved one a gift that they are sure to use with the added bonus of an increase over time. But how can you invest as a gift?
1. Treasury Bonds
United States Treasury Bonds are one way you can invest for someone as a gift. One advantage of investing in bonds is that they pay a steady rate of interest that does not fluctuate. Another is that they are not taxable by the state or federal government. And finally, bonds are a low risk investment.
There are disadvantages to investing in bonds, however. For example they usually have a lengthy term, which means they may not be appropriate as a gift if the person receiving it is not a child or young adult. In addition, the returns are low and may not even keep up with inflation.
Investing in the stock market is another way you could give someone the gift of an investment. Stocks have several advantages over bonds including the promise of greater returns on the initial investment. One of the other great things about stocks is that they can be purchased for people of many different ages and types. You can choose stocks on your own or go through a brokerage firm. Another way to invest in stocks is by going through a robo-advisor, like Motif, which can take some of the work out of investing while still allowing you some control in the investment choices you make.
3. Other Options
But stocks and bonds aren’t the only ways you can invest as a gift. You could still invest in their future by making an extra payment on someone’s house or car as a gift. Other ways include helping them pay off a debt or building an emergency fund for their future needs. If the person receiving the gift is school aged, consider starting a 529 college savings plan as an investment in their future education.
Of course, you could always take the easy way out and give your friend or family member a gift card instead. Or give the gift of cash by making a money lei, putting money in a card, or any of the other hundreds of creative ways you could choose to give money as a gift. But those options are not only impersonal, they don’t have the ability to give the recipient additional income through growth. Only an investment can do that.
Have you ever given an investment as a gift?
Kayla is a personal finance blogger in her mid-20s who loves to write about money topics of all kinds.
Enjoy Plunged in Debt?
Subscribe to get our latest content by email.