In past Christmases, Norm and Susan Zareski gave their two teen-age children such normal youth-oriented gifts as sports equipment and records. But this year, wanting their kids to learn about personal finance, they plan to give them shares in a stock and bond mutual fund.
"I would like them to become more knowledgeable about personal finance at an earlier age than I was," says Norm Zareski, 49, a computer salesman from Palos Verdes Estates. "At the same time, I would like to give them something that would keep on growing through the years."
Mutual funds are among many gifts this holiday season that can increase the enjoyment--and wealth--of your loved ones. If you haven't yet completed your Christmas list, here's a sampling of some of this year's more popular investment-oriented gifts:
- U.S. savings bonds. Sales of this traditional favorite have taken off recently, thanks to an increase in the current annual rate on the Series EE bonds to 7.17% on Nov. 1 from 5.84%.
A big advantage: They can be purchased at many banks for as little as $25. And they are not taxable until maturity, making them a great gift for minors.
- Stocks. Although costly in terms of commissions, giving small amounts of shares to kids also is a good way to encourage them to learn about investments. Although most brokerages frown on orders of as little as one share, Merrill Lynch will perform such a trade for commissions of between $5 and $10, says Larry Biehl, a San Mateo, Calif., financial planner.
If you have stocks that have appreciated in value, consider giving them to your children over 14 years old or to retired parents. Capital gains then will be taxed at their presumably lower tax rates.
- Mutual funds. For gifts of smaller amounts of money, mutual funds are superior to stocks because of the lower transaction costs and added diversification, notes Stephanie Enright, a Torrance financial planner. Fund companies allowing initial investments of $100 or less include the Twentieth Century family of funds (800-345-2021) and Delaware family of funds (800-523-4640).
Adults in California can give fund shares to children less than 18 years old under the California Uniform Trust for Minors, allowing the adults to manage the accounts for their children, Enright says.
- Insurance. John D. Cartwright, a Torrance financial planner, says some of his clients are buying single-premium whole life insurance or universal life insurance policies for their children. For a one-time premium of $5,000 in a single-premium life policy, a 15-year-old child can get a death benefit of between $25,000 and $40,000 while accumulating, tax-free, investment earnings at a current rate of 8%, Cartwright says.
Alternative: Keep the policy yourself and make your child the beneficiary, Torrance planner Enright suggests. Such a policy, she says, is a good way to build up funds for your child's college education.
- Stamps. Popular items this year include the 1847 five-cent stamp picturing Benjamin Franklin, which was the first U.S. stamp ever issued, says Michael Orenstein, stamp manager at Superior Stamp & Coin in Beverly Hills. It sells for between $350 to $1,000, depending on condition. Also hot: stamps in the Graf Zeppelin issue of 1930, which most serious U.S. collectors want to own; a set of three stamps costs between $2,500 to $3,000, Orenstein says.
Popular items for smaller budgets include the 1982 U.S. issue of 50-stamp sheets of all state birds and flowers, selling for $20, or the 1976 50-stamp sheets of each state flag, selling for $15, Orenstein says.
- Gold. American Eagle gold coins are a hot Christmas gift this year because of the stock market crash and the recent rise in the price of gold, which closed Friday at just under $500 an ounce.
American Eagles also are popular in cuff links, stick pins, earrings, necklaces and other jewelry, says Luis Vigdor, executive vice president of Manfra, Tordella & Brookes, a major New York gold dealer. A one-ounce Eagle, now selling for about $520, will cost about $620 mounted to wear as a pendant.
Also popular are the U.S. Constitution coins commemorating the bicentennial of that document, Vigdor says. A proof set containing a quarter-ounce gold coin and a silver coin sells for $250, he says.
- Investment calculators. Financial planner Cartwright says a hot item among his clients is the Hewlett-Packard 12C calculator, which can compute such things as compound interest, mortgage rates and the present and future value of investments. It sells for as low as $70.
- Investment publications. Torrance financial planner Steve Love says subscriptions to such financial publications as the Wall Street Journal or Barron's are always popular.
Newsletters also are popular gifts. Love gives some of his clients Tax Hotline ($39 a year; 212-239-9000), a monthly newsletter providing tax tips written for the layman.
Another newsletter that Love recommends is Mutual Fund Forecaster ($49 a year; 305-563-9000), a monthly newsletter touting mutual funds.