Instead of driving around, braving the crowds; looking for some holiday gift that will soon be forgotten, how about giving one that really keeps giving and giving…
Do you have a child to grandchild with earned income? Instead of buying that video game system, tablet, computer, or sending a check (that they’ll probably blow), think about giving them a more secure future instead. Open and fund a holiday Roth-IRA.
An X-Box One (with a game or two) can run $500. That same $500 invested in a globally diversified equity fund growing at even 7% per year would give an 18-year old an extra $12,000 at age 65. If you put $500 a year in a Roth for just ten years, their retirement nest egg would be over $100,000. Not bad for $5,000 in total Christmas presents.
Giving someone a Roth is probably easier than a trip to the mall. Just go to TD Ameritrade and set up a free, Roth IRA (and, no, they didn’t pay for this plug). Then, deposit any amount you can afford (there is no minimum - just make sure you don’t deposit more than their earned income for the year).
Since this is not money the recipient will need to live on, take some smart risk with the investment and consider placing the money in the global stock market using something like Vanguard’s Total World Stock Index ETF (symbol VT), which TD Ameritrade offers with no commission.
Then, write a nice card that includes all of the account information. Explain that this is a gift of a better future and should not be touched for 45 to 50 years. Then encourage them to add to the account regularly (they can contribute up to $5,500 a year, as long as they make less than $114,000 a year). Just imagine. It’s possible that they might never have to worry about retirement.
Now, that’s a real gift.
Note: The scenarios illustrated are hypothetical.