Christmas is only a few days away. Presents are being wrapped all around the country. Kids everywhere will go to bed on the 24th with eager anticipation as to what they might expect to find under the Christmas tree the next morning. While they’re not as much fun as a shiny new phone or a PlayStation, giving your family members investment gifts for the holidays can provide them with value that lasts a lifetime.
Case in point is Apple. If in 2001 you bought the first i-pod, it would have set you back a cool $399. Sure your teenage son or daughter would have been over the moon with that purchase. But within months, that piece of tech became old news. There was shiny new gizmo they wanted. And the i-pod was left in the attic never to be seen again.
On the other hand, if you had simply used that $399 to buy shares in Apple for your children, sure they would have hated you on the day, but today I bet they would have wished you bought more as the shares are now worth close to $100,000! That is a life changing amount that could be used on a house deposit, a new car, a fancy holiday and to squirrel away for retirement.
That is why you should think of gifting your children or other family members stocks this Christmas. Beyond cutting down on clutter around the house, purchasing stocks and other securities for family members during the holiday season has plenty of benefits.
It can bring in financial literacy at an early age. Explain to them how stocks are just ownership stakes in businesses and they can derive passive income from the dividends they produce. To make it more fun, invest in companies they know about and let them spend the dividends that roll in if they wish to. Show them that every time someone buys an Apple product they make money. Or every time someone streams a Disney film, or drinks a Starbucks, or makes a purchase on Amazon, or buys Nike or even just swipes there Visa, they can make money. Gifting shares and making it relevant can be the best way to teach family about investing.
So how do you go about doing it?
For children, the most convenient way would be to open a Junior ISA account in their name and invest in stocks on their behalf that way. Most online stock brokers offer JISA accounts so opening one should not really be a problem. If you put £300 into a Junior ISA each Christmas from when the child is born you’d hand them over £12,000 on their 18th birthday, assuming 8% growth a year. That’s a good chunk of money to start their adult lives.
The other option would be to gift shares. If you are gifting shares to your spouse, you wouldn’t need to pay capital gains tax. On the other hand, if you gift shares to your children, you’ll need to pay capital gains tax on the difference between the value of the shares when you bought them and the value when you pass them on. However, you wouldn’t need to pay tax if the gain is within the £12,300 annual limit, for the current tax year. Anything above this will be charged at 10% tax if you’re a basic-rate taxpayer or 20% tax if you’re a higher or additional rate taxpayer.
So there you have it, if you are stuck on what presents to get or just looking out for your families future, consider gifting shares this Christmas.
Stocks and Shares are probably the best gift you can give your children. They for sure will hate you on the day as they won’t appreciate it but I can guarantee that twenty years down the line when they are older they will surely appreciate it and wish you had bought them more stocks in great businesses instead of cheap throwaway toys.