The Best Ways to Gift Money Instead of Presents During the Holiday Season
You know that it's time to think about holiday gift shopping.
Buying a gift for someone is a great way to show them that you’re thinking of them but choosing what to get can be difficult.
It’s hard to know exactly what the person will want and what they will actually find useful.
The last thing you want to do is buy something that the person will never use but will feel guilty about getting rid of because it was a gift. Even worse you might find yourself giving the same gift as someone else does so the recipient now has two copies of the same item.
There’s one type of gift that can never fail:
A financial gift.
Everyone can use some extra money and they can use that money to get exactly the thing they need or want.
Many people see giving money as impersonal, but it doesn’t have to be that way. Depending on how you make your financial gift, the recipient can clearly see the thought and care you put into the gift.
If you’re thinking about giving a financial gift this holiday season, here are 7 creative ways that you can do it.
The old saying that cash is king still rings true.
You can make a cash gift to someone, placing a few bills in a card or just giving it to them when you see them.
Giving cash is one of the easiest ways to make a financial gift to someone.
It requires very little preparation on your part. All you have to do is make sure that you have enough cash to give to the person, which might mean a visit to the ATM.
For the recipient, a cash gift means that they can effectively choose what you give them.
It ensures that the recipient winds up with something that they really wanted or needed, rather than making you do some guesswork and hoping that your gift will be useful.
The downside of a cash gift is that some people can see them as impersonal or rushed. How you frame the gift when you give it can help avoid these feelings.
2. Prepaid Gift Cards
A prepaid gift card is another way to give a cash-like gift.
It’s important to note that this doesn’t mean a store-branded gift card or a prepaid debit card. Store-branded cards can only be used at specific stores.
Prepaid debit cards have fees and are designed to replace a checking account.
Prepaid gift cards can be purchased at drug stores, grocery stores, and other stores. You’ll often see generic Visa and Mastercard gift cards alongside the other gift cards.
You pay a small activation fee (usually about $5) and can load as much money on the card as you’d like.
These gift cards are a good way to make a financial gift more personal.
Rather than a cash gift, which can get mixed in with the other money in someone’s wallet, a prepaid gift card will be separate from the person’s other finances.
That means they can better track exactly what they’re buying with your gift, making it feel more personal.
Gift card giving surged during 2020 to new highs, with nearly 75% percent of adults making a gift card purchase during the holiday season and spent roughly $44.83 per card according to Forrester Research.
Savings bonds are a popular gift, especially for people who are making gifts to younger people.
They’re a great way to make a gift that serves as an investment for the recipient’s future. They can also help teach younger recipients about saving and investing as they can watch their bond’s value grow over the years.
One of the best types of bonds to give as a gift is a U.S. Savings Bond. These bonds are backed by the U.S. government, making them some of the safest investment in the world.
You can gift either Series EE savings bonds or Series I savings bonds.
- EE Bonds earn a fixed rate of interest.
- I Bond interest rates are composed of a fixed rate and an inflation rate adjustment.
Only I Bonds are available (limited) in paper form. You can gift either type of bond using TreasuryDirect, the government’s savings bond website.
To buy a savings bond for someone, you must know the following information:
- Their full name
- Their Social Security Number
- Their TreasuryDirect account number
If you’re buying for a younger person, such as a grandchild or niece or nephew, you can ask their parent to set up a Treasury Direct account so you may make the gift.
Like bonds, buying stocks for someone is a great way to give them a gift that will grow into the future.
It’s also a good way to educate younger recipients about investing and the stock market.
If you already own the stocks that you want to gift, you can retitle the shares in your brokerage account. Simply contact your brokerage and let it know what you’d like to do.
The brokerage can walk you through the process.
You can also set up a Dividend Reinvestment Program (DRIP) in the recipient’s name.
With a DRIP, you make a one-time purchase of stock.
Each time the stock issues dividends, those dividends are used to purchase more stock.
Over time, the recipient will wind up with more and more stock. Later, they can sell the stock or cash out the dividends.
GiveAShare lets you buy a single stock in a huge variety of companies. They’ll print a replica stock certificate that you can give to the recipient so they have a physical reminder of your gift.
Stockpile lets you buy fractional shares of companies so you can give an exact dollar amount gift.
You can also buy physical gift cards that can be redeemed for a certain amount of a stock. This is a great way to help someone invest in their favorite companies.
5. Loyalty Program Rewards
Many credit card companies and airlines offer rewards programs where you can earn miles or points when you use your card or take flights.
You can then redeem those points for a variety of things, such as cash, free travel, electronics, and other merchandise.
Many of these programs let you gift your points or miles to other people who have accounts in the program.
Giving points or miles can be a great way to make a financial gift. For example, if you have a lot of airline miles, you can gift someone enough miles to go on a nice vacation.
There’s no cost to you to make the gift, other than the opportunity cost of not being able to use those miles.
Giving points and miles also gives the recipient flexibility, as they can choose what to spend the points or miles on.
6. Set Up a Trust
Setting up a trust is a good way to make a future gift to someone.
Trusts are designed to make it easy to give financial gifts to someone while providing some structure to the gift.
Unlike a cash gift, which the recipient receives and can spend on anything, making a gift by setting up a trust allows you to set restrictions on the gift.
For example, you can set up a trust that will only pay out money if you recipient spends that money on education.
Or, you could set up a trust that will match a recipient’s contributions to a retirement account.
One popular type of trust is one that only lets the recipient access the money at a specific age or once they’ve completed a specific set of requirements.
Trusts are incredibly flexible and let you give financial gifts in a variety of ways. You should consider speaking to a trusted professional to get help with structuring the trust to your liking.
7. Add Them to Your Will
Though few people like to think about it, part of living is preparing for the end of life.
If you have assets to your name when you pass, you want to make sure that your wishes are followed and that those assets are passed on to your heirs.
One way to make a financial gift to someone is adding them to your will.
Specify what the person will receive when you pass and talk to them about what you plan to put in your will.
When writing your will, make sure to consult a professional to make sure that the document is in order and enforceable.
Consider Consulting a Professional Before Making a Financial Gift
Giving financial gifts that are more complicated than cash or a gift card can involve some unique legal and tax situations.
When giving gifts like stocks and bonds, you need to make sure that the gifts are accounted for properly and help in the correct accounts.
Doing things incorrectly could incur taxes or other types of fees.
If you’re planning on giving a large or complicated financial gift, consult a tax or other professional who can help you structure the gift.
Giving a financial gift is a great way to show someone that you care, and you don’t have to go with something as impersonal as giving cash.
Consider giving another type of financial gift that the recipient will be able to use and remember for the long-term.