Give the Gift of Wealth

The season of giving often centers around toys, gadgets, and other material items. While these gifts bring joy and excitement in the short term, there’s an alternative that can provide long-term value: financial gifts that grow over time. This year, Parents, grandparents, and godparents can make a more lasting impact by giving the gift of wealth. Consider buying a few stocks, units in a successful mutual fund or other starter investment accounts for significant future milestones like college or a home purchase.

Why Financial Gifts Make Sense

Research shows that early exposure to savings and investments can have a profound impact on a person’s financial literacy and habits. According to an ING International survey in Europe[1], children that receive pocket money are more likely to develop strong financial planning skills in later life and are less likely to be in debt.

Benefits of Financial Gifts:

Long-Term Growth Potential: Unlike toys that lose their novelty or gadgets that depreciate, financial gifts like stocks or mutual funds grow with time. For Example: A US$1000 investment in the S&P 500 index fund 18 years ago (December 2006) would be worth approximately US$4,265.17 as at December 5, 2024, using an average annual historical return of 8.5% per annum.

Educational Opportunity: Receiving a financial gift offers a chance to teach children about concepts like savings, investing, and compounding interest.

Milestone Support: These gifts can contribute to significant life events, such as college education, buying a home, or starting a business. For example, the cost of a four-year college degree is expected to rise to over US$500,000 by 2042, according to projections from JP Morgan Asset Management. It is important to start early.

Types of Financial Gifts for Children and Young Relatives

• Stocks: Giving stocks provides children with a stake in well-known companies they recognize, like Disney, Apple, or Netflix. Create some incentive for them to research and track and get involved with their financial affairs.
• Mutual Funds or ETFs: Mutual funds and Exchange-Traded Funds (ETFs) offer diversification, reducing the risk of losing money in individual stocks. These can be vehicles to save towards college or a home purchase or even retirement. For example, US$1000 invested in one regional mutual fund in 2003 would be worth US$8,600 today.

How to Present Financial Gifts Creatively:

Combine the gift with Education: Pair the financial gift with a book on money management, such as The Richest Man in Babylon or Rich Dad Poor Dad.

Set Goals Together: Encourage children to set financial goals with their gift. For example, they might save for a trip, college, or even a car.

A financial gift is not just a gift for today but a legacy for tomorrow. Consider giving the gift of wealth to your children, grandchildren and other young relatives or loved ones.

Marian Ross-Ammar is Vice President, Trading & Investment at Sterling Asset Management. Sterling provides financial advice and instruments in U.S. dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm

Feedback: If you wish to have Sterling address your investment questions in upcoming articles, e-mail us at: info@sterlingasset.net.jm

Disclaimer: This article was partially generated with the assistance of AI technology.

[1] https://www.ing.com/Newsroom/News/Features/Feature/Pocket-money-boosts-money-management-skills-in-adulthood.htm#:~:text=Adults%20who%20received%20pocket%20money,long%2Dterm%20financial%20planning%20skills.