Wendy Bennett

In our culture, Christmas gifts offer an opportunity to express love, appreciation and celebration.

The idea of gift-giving normally invokes visions of beautifully wrapped gifts, their enthusiastic unwrapping and the discovery of what physical contents lie hidden inside. It is acknowledged that cold, hard cash and gift cards also have gained popularity, but there are additional ways to offer gifts of a financial nature that can grow over time.

While traditional gifts may be used up quickly, an investment gift has the potential to grow in value, thereby helping to accumulate future wealth. Gifting investments like stocks, exchange traded funds (ETFs) or mutual funds can be a thoughtful and practical way to encourage the recipient to focus on allowing their wealth to grow over the long-term because of the potential for appreciation in the value of their investments.

This appreciation, also called long-term capital gains, is taxed more favorably than ordinary income in a non-retirement account and can significantly increase the value of the gift over time. The recipient can enjoy a considerable return without spending any money out-of-pocket.

Consider the fact as well that investments often earn dividends which, if reinvested, can compound over time so the initial gift can grow exponentially. The earlier the investment is made, the greater the potential for significant growth.

By gifting investments, you can provide a valuable lesson in personal finance that can benefit recipients throughout their lives, helping them to become more financially literate by learning how investments work, how to track investment performance and the importance of saving and planning for the future.

Additionally, investments can help establish a long-lasting financial legacy by affording the opportunity for the gift to grow and benefit future generations, thus helping to create wealth for future family members. Keep in mind that the recipient will receive your gift based on your original investment in the security which may create tax implications to the recipient.

Help the recipient reduce the chances of making poor investment decisions by gifting low-cost index funds or ETFs that offer exposure to a broad range of stocks or other assets, reducing risk compared to individual stock picks. This can be an excellent way for the recipient to benefit from market growth.

This year, I encourage you to consider a break from the norm by giving a practical and meaningful financial gift of investment assets that offer the recipient flexibility and empowerment.

Instead of spending money on material gifts that may lose their value or end up unused or discarded, you can offer a unique and thoughtful gesture by giving something that can help the person to build wealth, to better understand personal finance, benefit from the growth potential of assets over time and contribute to the recipient’s financial success in the long run. It is a gift that truly keeps on giving. Happy holidays everyone!

Wendy Bennett is a senior financial adviser at Bennett Associates Wealth Management in Butler. Bennett Associates is a registered investment adviser and does not provide any legal, accounting or tax advice. The material prepared is the opinion of the author and for informational purposes.