There’s nothing wrong with tossing a few dollar bills to friends and family during the holidays. Frankly, some people are just hard to shop for. What do you give someone who already has everything they want or need? Cash. It just seems like the easiest way to go.
But cash just sits there. It doesn’t accumulate interest –– sometimes, it even loses value (thanks, inflation).
So is there a better gift out there that might be worth more in the long run?
I Wanna Be Like Kanye
Cue Kanye West. Look, you don’t need to like the guy, but he was on to something when he gifted his wife, Kim Kardashian West, hundreds of thousands of dollars in stock for Christmas.
MarketWatch reports the rapper and clothing designer gifted Kardashian West over $268,000 in blue-chip stock from companies like Apple, Amazon, Adidas and Disney. She took to her Snapchat and Instagram accounts to showcase the stock certificates with the caption “Best husband alert!”
According to Investopedia, blue-chip stock is “the stock of a large, well-established and financially sound company that has operated for many years.” These stocks historically pay stable or rising dividends.
So was Yeezy’s gift better than cash? Maybe. As with any investment, there comes a risk. But considering he purchased her blue-chip stock, it’s likely Kardashian West will stay on the positive side of the investment, meaning she’s bound to make a buck or two (or thousands, considering the initial investment).
I’m Not Saying Go Out and Gift Blue-Chip Stocks
Blue-chip stocks are known for being expensive. At the time this post was written, a single share of Adidas stock costs 170.15 euros ($202.60).
So yeah, maybe it’s not exactly a realistic gift for all of us to give next year. But following Kanye’s lead of giving the gift of compound interest could be cool.
For example, my gift from my dad and stepmother this year was an investment fund — yes, adulthood is fun, guys. Every month, they’ll put the equivalent of one of my student loan payments into it. Once the fund reaches $10,000, it’ll be cashed out to me. The idea is that I’ll put the lump sum toward my student loan balance.
The fund, which is USAA’s First Start Growth Fund, has returned 16.37% over the past year, according to U.S. News and World Report. Now, there’s no guarantee this money will come out on the upside, BUT if this fund continues to grow at a similar rate, I’ll hit $10,000 in three to five years, which is a lot quicker than the five and a half years it would take without compound interest.
(Note: I am incredibly grateful for this gift, and I understand that not everyone has the luxury to gift this to their children.)
I know the thought of investing can be intimidating, but micro-investing apps can make it easy. And no, you don’t Kimye amounts of money to start. Actually, some of these apps hand you a bonus to start!
Take Stash as an example. It’s free to download, and you’ll bank a $5 bonus when you sign up. You can use it to start an investment fund that you’ll eventually hand over to someone as a gift, like my parents did for me –– or you can invest the cash you might have gotten this holiday season as a gift.
From there, you can set your account to automatically deposit money. For example, set it to withdraw $5 from your checking account each week. It adds up. And the investing is done for you with “Auto-Stash.” Do note there is a $1 monthly fee for balances under $5,000 (but the first month’s fee is waived).
The point here? Cash is cool, but compound interest can be cooler. And it can sometimes make that money worth more in the long run.
Kelly Anne Smith is a junior writer and engagement specialist at The Penny Hoarder. Catch her on Twitter at @keywordkelly.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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