With graduation season rapidly approaching, it is time to consider a timeless gift for your son, daughter, grandchild, or other close relative. Whether graduating from high school or college, there are many ways to show your loved one that you are very proud of his or her accomplishments. Many families will celebrate with huge parties, complete with catered food, every drink imaginable, and rented party tents; not to mention hired entertainment at some homes. Other families will provide their graduate with a brand new car, the latest and greatest laptop, or even a large sum of cash that he or she can spend on anything they desire. While I understand that we want to reward our children for their hard work, maybe we should consider scaling back a bit and giving them a gift that will last a lifetime. This all comes down to balance. Having balance in our lives is significantly underestimated. Too often we get caught up in our jobs, our academic lives, or maybe in a specific sport or hobby. We should teach our kids to strive for balance in all of these areas as well as monetarily.
While I certainly acknowledge that young adults likely have a need for a car, computer, or money, is it really necessary for them to have a brand new car, the most expensive laptop, or a large sum of cash to spend on frivolous items? Why not cut back a little on the partying and give them the gift of stock? A gift of stock gives your graduate ownership in a company and a portion of its profits in the form of dividends. Companies like Mcdonald’s, Home Depot, Nike, Walt Disney, Coca-Cola, Microsoft, Hershey’s, General Electric, and ExxonMobil are just a few examples of companies that pay dividends. Some companies, like Procter & Gamble, have raised their dividend payment every year for the last 60 years!!
While there is never a guarantee when investing in stocks, wouldn’t it be a good idea to get your loved one started on a path to financial wealth and independence? And best of all, you can buy stock in many companies directly through their websites! Just click on the ‘Investor Relations’ link and call their 800 number to find out how to buy shares of their stock. This is very cost effective because you are bypassing the middle man and, therefore, are not paying a commission. Furthermore, most of these companies will allow you to automatically reinvest the dividends into more shares of the stock. The more shares you own, the more dividends you get! Maybe your graduate can even start investing his or her own money this way by automatically buying some shares each month. Some companies will let you invest this way (this is called dollar-cost averaging) for as little as $25 a month. Keep in mind that eventually he or she will need to diversify their investments to reduce the risk of owning just one stock.
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I recommend pairing a gift of stock with a starter book on investing and/or personal finance. One of the books I have found valuable for young people is ‘The Millionaire Next Door’ by Thomas Stanley. This book teaches valuable lessons on how to live within your means. However, my all-time favorite starter book on investing is ‘The Early Investor: How Teens & Young Adults Can Become Wealthy’ (found on the link below) by none other than me, Michael Zisa. (Yes, I’m self-promoting here!!) You can find these books on Amazon.com. The Early Investor is also available on my website, BecomeAnEarlyInvestor.com.
Congratulations to all our graduates on a job well done! Best of luck in college or your early career. And always remember this motto: buy assets, not liabilities!!
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Mike Zisa, Financial Literacy Educator & Author of 'The Early Investor: How Teens & Young Adults Can Become Wealthy'