It's that crazy time of year again, when almost every parent is running around the shopping mall like a wild hare. But the best present for your kids is right under your nose... and you don't even need to leave the house. Stocks!
That's right. Stocks, not socks, are what your kids want for Christmas. Okay, perhaps they might need some convincing and a decently sized chocolate bar to understand it, but nothing else will grow in value like stocks will. Let's explain why...
The Best Christmas Presents are Stocks, Not Socks
We know how it is, parents. Christmas shopping is a mammoth task that leaves you exhausted. But worse than that, sometimes you just wonder what value random presents at the end of each year really gives your children. They're likely to move on to the next cool thing within the following year anyway... so what can actually be a gift that will benefit them? Okay, you got me. It's stocks.
Children have the biggest advantage of all – time.
Warren Buffett once said that his biggest regrets in life was that he did not start investing earlier. While children might not understand it just yet, stocks are actually wonderful gifts... because compound interest means that, when they turn 18, they have a sizeable investment to call their own. Warren Buffett understood these benefits of compound interest, even if a little late.
Compound interest is the "accurate upgrade" to simple interest. Some call it the secret to value investing, because it increases your portfolio exponentially by reinvesting your returns and dividends to earn interest on interest. The only thing standing between you and this exponential increase in your investment is time. Because, while compound interest does increase exponentially, it can often take at least up to 5 years to start seeing any significant benefit. In fact, Warren Buffett only began reaping the rewards of compound interest when he was 50 years old. Small incremental investments into a portfolio for your children make thoughtful gifts - because when these gifts are realised in 20 years time, they will have increased in value exponentially.
Let's look at an example of compound interest. Say you invested £250 each year into a savings account (with, say, 5% annual interest, compounded monthly) for your children from their first birthday. At 21 years, they'd be presented with a total amount of £9,969.98. That's £4719.98 in interest earned. If they continued the tradition from this point until they retired at 65 years old, they'd have a portfolio of £129,488.14. That means from a capital £16,500, they'd earn £112988.14 in interest! This is only with a 5% annual interest rate in a general savings account, so just think of what a good valued stock might return to them.
No one could deny the benefits of investing for your children as a Christmas gift. A trendy toy or gadget might bring them some momentary joy, but a stock could secure their financial future and set them up for life.
A Very Merry Christmas from the STRIDE Team
Lastly, we must wish all of our readers a very merry Christmas from us at STRIDE. We really do hope you're having a fantastic holiday season and getting work out of your mind.
For kicks and giggles, that's just our CEO in a festive hat, looking merry. Happy Holidays!
We're getting into the festive season by giving away a free live demo of STRIDE's stock screening software below. Don't miss out.