Are you interested in finding a more thoughtful gift option for friends, loved ones, or their young children? Stock gifts are a great option that can provide long-term value and financial growth. Giving shares of stock as a gift is a lot easier than you might expect. Here’s everything you need to know about how to gift stock.
Why Give Stock Gifts?
Stock gifts introduce recipients to the world of investing. They offer an opportunity to teach someone about ownership, market growth, and the importance of financial responsibility. Here are a few other reasons to consider giving someone shares in a company:
Long-Term Growth
Material gifts depreciate. The recipient might not even use what you buy them if it doesn’t suit their style or preferences at the time. Clothes can be a particularly wasteful purchase, especially if you are buying for young children. They grow fast and may not be able to wear the clothes within a few months.
In contrast, stocks have the potential to grow over time. A well-chosen stock could significantly increase in value and benefit the recipient for years to come.
Educational Opportunity
Stock gifts introduce the recipient to the stock market. Receiving stock can spark an interest in how the market works and the importance of saving and investing. While not everyone will be captivated by the financial market, your friends and family will still benefit from learning about this important world.
Personalized Gift
You can tailor your purchase to the person’s interests. Let’s say your niece or nephew loves Disney. Learning how to buy Disney stock as a gift can make the present more exciting and relatable. You can tell them they own a part of the company that makes their favorite show or movie. It connects their passion to a financial investment.
How to Buy Stock as a Gift for a Child
If you’ve never purchased stock for yourself, the thought of buying it as a gift for a child might feel a bit daunting. The good news is that gifting stock is a whole lot easier than you might expect. Here are four simple steps to buying stock as a gift for a child (or anyone else):
Choose the Right Stock
Step one involves choosing an asset that aligns with what the recipient likes. If you are buying for a child, consider companies they recognize and care about. Apple, Nike, or Disney stocks might resonate more with a younger audience.
You can apply this same concept when buying for adults. Suppose that you are giving a gift to a friend who loves their daily cup of coffee. You could purchase shares of Starbucks or Black Rifle Coffee Company. They will appreciate that you put some thought into the decision and linked it to their interests.
If you are torn between multiple options, consider which companies have a history of steady growth. Most well-established brands are relatively sound choices. However, if a company’s stocks have been trending down in value over the last few months, you might want to make a different choice.
Open a Brokerage Account
You’ll need access to a brokerage account. You can use an online brokerage and buy stocks directly from your app. If the person you are buying the shares for doesn’t have their own brokerage account, you may need to open a custodial account in their name. This is especially common when a minor is involved in the transaction.
You’ll be able to manage the child’s investments until they turn 18 or 21, depending on the state. We recommend talking to the child’s parents and letting them know what your plans are. This way, you can give them the custodial account information. They can add to the account and buy more shares for their child.
Purchase the Stock
Once you’ve set up your account (and the recipient’s, if necessary), you can buy the stock. You can even purchase fractional shares, which are parts of a stock, to save money.
Perhaps you want to buy a share of Disney stock. Shares in The Walt Disney Company have fluctuated from just under $80 to nearly $200 per share over the last five years. If you only wanted to spend $50 on the gift, you could buy a portion of a stock in the company. You can apply this strategy to just about any stock as long as the brokerage you are using allows you to buy fractional shares.
Transfer the Asset to the Recipient
After you complete the purchase, transfer it to the recipient. If it’s for a child, the stock will remain in the custodial account until they reach the appropriate age. If you’re gifting to an adult, most brokerage accounts have simple processes for transferring ownership.
How to Buy Disney Stock as a Gift
Disney shares are a popular gift stock choice, especially for younger recipients. You can purchase Disney stock through a standard brokerage or enroll directly in the shareholder’s program Disney offers. Computershare Investor Services is the official Registrar and Stock Transfer Agent for The Walt Disney Company.
No matter where you purchase the stock from, you’ll need to set up a custodial account as described above. Once the account is ready, you can buy the desired number of shares. That’s all there is to it.
Benefits of Gifting Stock to a Child
Buying stock as a gift for a minor can be a great way to introduce them to the world of investing. If you are purchasing the shares for a niece, nephew, or your own children, you can manage their custodial account until they reach adulthood. You can make buying stock an annual tradition and help jumpstart their portfolio.
Gifting stocks to a child can be an excellent way of teaching them financial responsibility and supporting their long-term goals. Stocks will grow with them. They can even hold onto the shares you provide for decades and benefit from long-term appreciation.
Tax Considerations When Giving a Stock Gift
You can give someone a certain amount each year without incurring gift taxes. The Internal Revenue Service adjusts the gift tax limit annually. The 2024 annual exclusion limit is set at $18,000. You probably won’t be giving someone more than $18,000 in stock gifts in a single year, so there aren’t any major tax concerns to worry about.
However, if you do intend to give a large stock gift, make sure to consult with a financial advisor. They can provide strategies for reducing your tax liability and that of the other party.
Additional Tips for Gifting Stock
Here are a few extra tips to help you choose the right stock gifts for your friends and family:
Buy Fractional Shares
If a full share of a company like Amazon or Tesla is too expensive, look into gifting fractional shares. Many brokerage platforms allow this. Fractional shares make gifting stocks from high-value companies more accessible.
Include Educational Resources
Consider providing your friend or family member with a book or subscription to an investment education platform. Learning resources will help the person understand how to manage their new investment.
Set Realistic Expectations
It’s important to explain that stock investments can fluctuate in value. While stocks have the potential for long-term growth, they may also experience volatility.
You need to set realistic expectations for yourself as well. Your five-year-old niece or nephew probably won’t be ecstatic to get stock as a gift. Consider giving them a small tangible item, too. Older children and adults are more likely to understand and appreciate a financial gift like stock.
Choose the Best Stock Gift With Gorilla Trades
Not sure which assets would be a good fit for your loved one? Check out Gorilla Trades and leverage our market-tested approach to choosing stocks. You’ll find user-friendly tools and services to help you make smart investments.
