Gifting Stock Instead of Toys: Do's and Dont's
"No one has ever become poor by giving."
A few months ago, my husband and I were invited to a birthday party for my friend's 4-year-old. Given my foray into minimalism and sustainability and personal finance, I didn't personally want to give another plastic gift. I also didn't want to give another item that they would have to maintain or would end up in the landfill a few days later. So after much research, I decided to give the gift of stock. I opted for this because I knew the father was into stocks and would be able to manage this gift. So I ordered a gift card from Stockpile and sent it over via email. I gave a card at the party with a note about the gift in his email account. (On a side note, I never received a confirmation that it was received after a few days so I got worried. I had entered the incorrect email originally but thankfully was able to correct it easily a few days later). It was seamless and from my perspective easy gift on my part. I did start to think about what parents actually think about such a present.
Is gifting stock instead of toys a do or a don't?
So I asked this question to my Instagram followers and below is a summary of the feedback I received.
Check in with the parents and let them know that you want to give an alternative gift. Ask if you can contribute to a 529 Savings Account or ask if you can send over the gift of stock on behalf of the child. The gift giving is ultimately your decision, but it's good to check-in so that you can also be helpful in the items that you give.
Make it clear who the gift is for. Indicate that the stock is for the child. The parent can manage it however they want, but the intention is to help build a savings account for a child that you care for. This is in no way meant to instill your parenting style or any money advice of the sort.
Make it clear why you are doing this and how this is in line with your values. There's a gift-giving convention that permeates certain cultures so make sure you acknowledge this while also being true to your own personal values. It is your money after all.
Assume the parent will know what to do with the stock gift. Some parents may not be aware of what to do with a gift like this so make sure the service provider you choose to send your gift from provides clear instructions on how to use.
Assume the gift has been claimed. The provider I used, Stockpile, sent me an email once the recipient accepted the gift to confirm it got to the right hands and was being managed.
Ask to see what the current value of the stock is. This is now the personal responsibility of the parent and the child and they can do whatever they please with the gift. We do hope that it is kept to grow and compound over the years, but that is not up to us to decide and there's no guarantee with a gift like this. We have to decide what's best given today's information.
Reasons to Saying Yes to A Stock Gift
For parents who are considering if a stock gift should be accepted in lieu of gifts, consider the following:
Stocks can add up over time. If a few family members buy a few shares each birthday, the rate of return by the time the child is eighteen can be significant. The money can be used for college or pay for other expenses in the future.
Stocks last longer. Parents can always exchange the stock for something that is in line with their investing values. Toys typically last a few minutes to a few days.
Stocks can mean less clutter. For those striving for a more minimalist home and reduce the number of toys their children are inundated with, stocks can help reduce clutter significantly. It does require another form of maintenance, but you won't need to manage it daily at least.
Stocks are a great education tool. For kids that are old enough, stock can be a great investing tool. It's never too early to teach them how companies work, how the stock market works and how they can make their money work for them. The power of compound interest early on can also be a great lesson.
Reasons to Saying No to A Stock Gift
Alternatively, a stock may not be a good gift for these reasons:
Contribution to a 529 account is preferred to help fund the child's future education expenses. Perhaps, this is an account that is already opened with funds in it. I do want to caution that a 529 can be very limited in the way it can be used in the future since it is specifically for educational expenses.
Unsure of how to manage it. Sometimes, parents are not sure how to manage stock so this may cause anxiety in the long-term. It's something that the gift giver should be aware of so that the gift is managed properly for growth.
Not sure how to ask family and friends. Certain cultures have different gift-giving values so it may not be easy to ask to forgo a present and give money/stock instead. This is something that needs to be reviewed by the parents and the values that they have.
Not fair to the child to not have a present to open. Stocks are by definition a delayed gratification gift so parents may want to figure out a balance between something that can be enjoyed today versus in the future.
My Final Thoughts
My experience is only from the gift-giving side, but I would personally consider this when the time comes. While I won't want to be asking for specific presents for children, if friends are willing and open to contributing, I would gladly accept their generosity. I would also personally keep a tally of everyone who contributed so that one day, we may be able to give a big thanks for helping fund a big expense for a child. In the end, too, they helped raise a child so it's only fitting that we show appreciation.
In the ChooseFi podcasts, Jonathan and Brad always talk about 2nd Generation FI/RE and I think this is one way to start that 2nd generation on a financially secure path.
I used Stockpile because they fit my needs at the time. There is a fee to trade in Stockpile. As alternatives, consider going directly to a broker like eTrade or Ally.
Have you gifted stock before? What was the outcome? How about receiving stocks as a gift? What did you do with it? Let us know your thoughts on this.