What have you always wondered about the economy? Tell Us
Ask Money

A holiday gift that grows

Chris Farrell Dec 17, 2010

Question: For the last few years, I’ve given each of my young nieces $50 savings bonds for Christmas. I like the idea of giving them something they can use when they’re older, for more expensive items. And obviously, my $25 investment now is pretty cheap. But is there a better product I could get them that would have a better return than a savings bond, one that might mature earlier? My nieces are currently ages 4, 7 and 8. Angie, Brooklyn Park, MN

Answer: You’re a good aunt. I like the idea of giving a gift that grows with time rather than ending up in a landfill. I’m also a huge fan of savings bonds as a gift for children. No commission costs to buy and sell. No credit risk. It’s a safe investment.

But what else?

It would take more money, but you could purchase each of them a share in a well-managed low-cost mutual fund that invests in both stocks and bonds. (The label is typically a balanced fund). The money will have time to compound over time for your nieces. But that usually involves more money than people want to spend on a holiday gift.

My favorite alternative to the savings bond, at least for the 7 and 8 year old, is getting each of them an individual stock. This gift comes under the category of learning experience rather than making money (although hopefully that happens too.) Owning a stock opens up a whole new way of looking at the world. And picking stocks can be a lot more fun than owning a savings bond.

For example, you could get them involved in the stock pick. What clothes do they like? Well, what company makes them and is it publically traded? What are their favorite toys? How about books? Whatever their interests there are publically traded companies for them to learn about. It’s a gift that will become more valuable and understandable to them over time. And Internet discount brokerage has truly cut down on the costs of owning stocks.

We did a whole show devoted to kids and money. You might get an idea from it, too.

Happy Holidays.

News and information you need, from a source you trust.

In a world where it’s easier to find disinformation than real information, trustworthy journalism is critical to our democracy and our everyday lives. And you rely on Marketplace to be that objective, credible source, each and every day.

This vital work isn’t possible without you. Marketplace is sustained by our community of Investors—listeners, readers, and donors like you who believe that a free press is essential – and worth supporting.

Stand up for independent news—become a Marketplace Investor today with a donation in any amount.