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The Gift That Keeps on Giving

This holiday season may be the perfect time to consider the gift of investing.

By Cydney Baron | December 16, 2020

Sometimes the best gifts aren’t things. A 2019 international survey found that three out of four consumers value gifts of experience more than tangible items.

That may be especially true this holiday season. So, for anyone wanting to give a memorable, experiential gift that could appreciate in value over the years (rather than be forgotten by New Year’s), the gift of investing may be a good choice.

Kim Bridges, director of financial planning at BOK Financial, said those considering giving investment assets should first consider their motives.

“I think giving investments as a gift is a great idea,” she said. “The first step is to think about what you’re hoping to accomplish. There’s a reason you’re not giving a sweater; a reason you want to do something more.”

You may want to introduce a loved one to investing, or begin a shared experience, she said. “This is a gift that doesn’t end when the present is opened; it’s opening the opportunity to share your knowledge and love of investing with someone you love.”

Another key motive may be to transfer values.

“Maybe you have a desire to share your values around generosity and charitable giving with another generation … If you’ve been able to amass wealth through wise investing, you may want to share that knowledge and wisdom with your loved ones.”

She suggested potentially combining the two priorities by making a gift to a donor advised fund and adding your loved one as an advisor. Then you could work together to manage the investments and make grants from the fund to support nonprofits you both care about,” Bridges said.

The best charitable gifts—whether made to a donor advised fund or directly to a qualified charity—are assets that have appreciated and would be subject to capital gains tax if you sold them. Charities will benefit from the full value of the gift, and you will benefit by not realizing capital gains taxes.

National surveys have found additional benefits to giving any sort of investment as a gift, especially to younger generations.

Two-thirds of parents say they are reluctant to talk to their children about money, according to recent polls. Sharing the gift of investing may be a way to jump-start those conversations.

A Gallup survey last year found that only 37% of adults under 35 owned stocks in 2017 and 2018, down significantly from 52% before the 2008 market crash.

“I think it’s really important to teach children about money, stewardship and how to invest. You can graduate high school and college without ever learning about investing,” Bridges said.

Investment gifts could be for anyone on your holiday shopping list, not just kids. In a recent global study of financial literacy by S&P Global, the U.S ranked just 14th in the world when it comes to understanding such basic concepts as diversification and compounding interest.

“You may want to gift a portion of your stock portfolio to get them started with investing,” Bridges said. “There could be legacy stock, something that’s been in the family portfolio for years, or some low-basis stock that you need to diversify out of.”

Bridges offered one good rule of thumb to remember when giving investment, or any other gift: “Once a gift is made, you give up control of the outcome. Whether you are giving a vase that is a family heirloom or stock that has been in the family for generations, once the gift changes hands, the recipient can do what they want with it,” she said.

Whether your motive is to create a shared interest, improve your tax burden, or aid in wealth building, Bridges recommends working closely with your tax and investment advisors to determine the type of gift that’s appropriate for your loved one. They’ll help you determine the most appropriate stocks to gift and advise you on any tax rules and implications at play.

For a meaningful and memorable holiday gift, consider a new, long-term approach this year.