A Five Step Plan to Cure Worries About Savings and Investments

A Five Step Plan to Cure Worries About Savings and Investments

Maybe you know the feeling.

You wake up at night worrying. It’s like a rodent gnawing inside your stomach.

You worry about your finances. You feel like things are a bit out of control.

You should be on top of it.

But how? Where do you start?

Seven out of ten women stress about saving and investing, according to a study from Fidelity.

Six out of ten say that it has gotten worse during the pandemic.

It’s an American study, but it is a reasonable assumption to say that this is probably a global phenomenon. It’s also fairly safe to assume that many men suffer from the same ailment.

It’s human and natural that anxiety grows when the world shuts down, and shares behave like a roller coaster that could be called the devil’s ride from hell.

But instead of popping a sleeping pill and ignoring the feeling, it might be a sign to take a closer look at the money matters.

Here’s what you can do:

1. Make a Money Date With Yourself

The time has come to get acquainted with your finances. You need an overview of how much money you actually have.

Step one: Write down all your assets: Your retirement savings, your cash savings, your stocks and shares.

Step two: Write down how much debt you have (including mortgage and student loans and whatnot).

Step three: Add up all the assets and subtract the total debt.

Now you have your net worth.

You have made your own balance sheet and figured out your equity. 

Plot down these numbers every month. It’s very motivating and calming to follow the development of your net worth (provided it grows and doesn’t shrink).

What about the value of the house or apartment you live in?

Good question.

I suggest you make two balance sheets.

One with your net worth without your home and one where you include it.

You have to live somewhere, and housing is a necessity. You can’t include it in the assets that you can live off long term (your financial freedom money).

On the other hand, you should include it on a separate balance, just because it’s motivating to see your total net worth develop. After all, the money tied up in your house is also your money. 

2. Have Emergency Savings

You need to have emergency savings in cash so that you are able to pay for any unforeseen expenses such as car repairs, a refrigerator replacement, or sudden high transportation costs due to an accident or illness.

Life can surprise us in so many ways. When it does, you don’t have to worry about the financial consequences. You have your own back and you’ve created emergency savings for that.

There must be at least USD 2,000 in a cash savings account that you always have access to – preferably with a debit card attached.

This account cannot be your normal account for daily expenses, because there’s a risk that those savings will be sucked into your day-to-day bills and expenses.

Make sure it’s a separate account and only used for that.

Having it clearly set aside for this purpose and not entangled in any other money transactions gives you an enormous benefit:

It creates peace of mind.

3. Have Security Savings

You should also have about 3-5 months’ salary available in cash.

This is the account that makes you worry less about getting laid off.

It’s also the account that gives you the courage to resign if something unacceptable happens at your job.

This amount should also be placed in a separate account, but it doesn’t need to have a debit card attached to it. You’ll have a bit more time before you need to access it.

The purpose of this savings account is to make you more calm in your work and less sensitive to the boss’ whims or any surprises at work such as a merger, budget cuts, or restructuring.

The benefit of this account is that it makes you more brave and able to weather storms at work.

It may be the single best thing you do for your career as it will make you able to make some bold decisions and brave moves. 

4. Have Automated Savings for Your Financial Freedom 

You also need a freedom account intended to make you financially free in the long run.

The important thing is that you automate the process.

You must be sure to put money into your freedom savings each month.

That’s why it’s such an excellent idea to make it an automatic transfer at the beginning of the month, so it’s as high a priority as rent and other fixed expenses.

The mistake most people make is that they wait and see what is left at the end of the month. Most people have a tendency to spend whatever is there, so nothing will be left for your future freedom.

How much should you transfer to your freedom savings each month?

A minimum of 10 percent of your salary, but more is better. If you can reach 20-50 percent, that would be even better.

Your freedom savings are to be invested in assets (preferably shares) so they can grow and work for you.

You are never to spend any of your freedom money until you’re financially independent.

The benefit will be immediate. Having set this system up, you will feel calm already today, knowing you are working towards true financial independence.

5. Gain Knowledge About Investing

You need practical experience in investing alongside coaching, training, and education.

You need to learn how to make your money grow in the best way possible.

We learn a lot in school. We learn to read, write, count, and play catch.

But we learn nothing about how to handle our money.

You must be your own schoolmaster and get educated about this.

Take courses, get coaching, read books, and read blog posts.

The Real Cure Against Money Stress

There’s no way around it.

You need to become intimate with your economic and financial situation. You must create different saving pots with different purposes. You must also give yourself the education that the primary school hasn’t managed to give you.

At first, it may feel uncomfortable. Maybe you want to stick your head under the pillow instead. But force yourself.

As you gain more experience, your money stress will disappear, and you will develop a sense of calm and more “money confidence”.

As you watch your money grow, you will get a sense that you are on top of things.

As you get into investing and get comfortable with it, you’ll find that investing is actually quite fun too.

Your first step towards learning more about investing could be downloading my free e-book Free Yourself. You can get it right here.

Five Ways to Avoid Losing Money After Becoming a Mother

Five Ways to Avoid Losing Money After Becoming a Mother

It’s expensive for women to have children.

Most women go on maternity leave, and then they return to the same or a similar job.

But because they have been absent, their careers lag behind those of their male counterparts.

Some women even take a pay cut to go part-time so they have more time for the children.

A woman in the US only makes 81 cents for every dollar a man makes (data from the Bureau of Labor Statistics, 2020).

In my country (Denmark), women experience a 10 percent decrease in income after one child, a 20 percent decrease after two children, and a 30 percent decrease after three children.

But does it have to be that way?

Not at all.

Here are five things you can do to avoid being punished financially because you have become a mother.

1. Share the Leave (and Other Duties) With Your Partner

The rules are different from country to country.

In my country of origin, you can take up to one year of maternity leave.

Sounds wonderful, right?

The problem is that women take most of it. In fact, in many cases, they take all of it.

Dropping out of a career for 9-12 months several times (if you have more than one child) can cripple your career and make your life income decline – if you are not careful.

If you live in a country where it’s possible to get a long leave, it’s really important to share that leave.

Not just because of the career opportunities after childbirth, but because of the patterns that are formed in the family.

It’s important that the parents share the tasks, and that the mother doesn’t settle into the role of the family project manager (unless she consciously wants to carry the biggest part of the child rearing duties).

If you live in a country, like the US, where you only get three months of maternity leave, then obviously it’s more difficult to share that if the mother is breastfeeding.

2. Delegate and Outsource Daily Tasks

Not only is it important to get the partner to share the work and leave 50/50, it’s also important to delegate to others.

Hire a cleaning lady, hire a nanny, get meal boxes delivered. If grandparents sign up for a weekly playdate, let them.

Make sure to outsource everything that a person earning less than you can perform so that you can focus on what you’re good at, and when it comes to your children, focus on quality time with the kids.

Children don’t care who does the dishes, who cooks and washes the floor. They don’t even care if the food is home-cooked.

But it does matter to them who reads the bedtime story, and who is there for them when they wake up scared in the night.

You need to prioritize the important quality time and outsource the household chores.

3. Keep Contributing to Your Retirement and Savings Accounts

Many women take an involuntary break from contributions to their life savings and retirement, like the 401k and Roth IRA, during maternity leave.

You need to avoid this because the long-term consequences go beyond the payment.

Continue to prioritize your retirement and life savings.

Maybe your partner can chip in if part of your maternity leave is unpaid and without benefits?

Talk it through before the baby arrives.

4. Invest in Stocks

You need to be committed to doing the opposite of lagging behind financially.

You should take some action to raise your finances to the next level instead of letting them slide.

Investing in stocks is an obvious way to compensate for the wage gap.

Women own far fewer shares than men, and fewer women are investors. It’s part of the pattern that creates economic inequality.

The time has come to change that.

You can’t always control how much you are paid and which promotions you get, but investing in stocks is entirely up to you.

5. Educate Yourself

You must continue to improve your skills, seek new knowledge, and educate yourself.

Take online (or offline) courses, read books, and upgrade yourself to an even better version of you.

Knowledge is like money – there is a compound effect. Don’t neglect it.

The Last Thing: Escape

I know I said five things, but there is one more which you only need in case of an emergency.

If you find that your boss curbs your career when you return from maternity leave, then you need to resign.

You can, of course, search for another job for a short period of time, but don’t wait around for too long.

It’s demotivating to work in an environment that tells your subconscious that you are worth less because you became a mother – or father (this also happens to men).

I was assigned to a less prestigious position when I came back from maternity leave, and was told I had to “start over”. On the second maternity leave, I was let go.

I had a male colleague who was moved from his old position to shifts at the copy desk when he returned from paternity leave. Instead of researching and writing stories, he had to edit other people’s work until 9 pm every evening.

“It’s better for your family,” they said.

He did the right thing and resigned before they could stick him at the editing desk.

If you experience something similar, remember that there are many other ways to make money.

If your corner of the job market doesn’t appreciate new parents, there’s only one thing to do: find a place in the job market where they still value you, and where they treat you well.

Maybe the time has come for a career change. Maybe you need to start your own business.

Maybe you just need to switch to the competitor.

Whatever happens, you stand stronger mentally and financially if you know how to make money work for you through stock investing.

It’s easier to make bold decisions if you’re financially independent.

What career would you choose if you didn’t have to work to pay your bills?

One way to upgrade your knowledge is to check out my e-book Free Yourself. You can download it here.

The Five Steps to Financial Freedom

The Five Steps to Financial Freedom

 

What’s the difference between being financially free and being financially independent? What do these terms really mean?

Many people use them without fully understanding what they mean or how to get there.

In this blog post, I’ll go through the five steps to reach financial freedom – and even generational wealth.

Level 1: Debt-free

First and foremost, you need to get rid of all your expensive debt. This could be consumer debt, quick loans, and overdrafts on your credit cards.

It doesn’t make sense to start investing if there’s a hole in your bank account where money is pouring out.

The rule of thumb is that you can start investing if you expect the return on your investment to be higher than the rate on your loan.

If you pay 15 percent on your loan and expect to get a return of 8 percent on your investments, you’re setting yourself up to lose money. You pay more for your loan than you gain on the investments.

In reality, it’s hard for beginners to get a consistent rate of return that’s higher than 10-15 percent a year, so any loan with an interest above 10 should be paid off as soon as possible. This should be your first priority.

But if you have a mortgage of one or two percent, it’s a no-brainer to keep that loan and start investing, as it’s not too difficult to earn more than that in the stock market.

Level 2: Financial security

To reach level 2, you need to build enough cash savings to cover any unforeseen expenses like car repairs, a new fridge, or sudden medical bills.

You should have about a month’s salary in a separate account for these kinds of unforeseen events so you don’t stress out about money on top of having to deal with some kind of misfortune.

Knowing that you have the money for any sudden mishaps creates a sense of calm in your mind – and you really need that if anything happens.

Level 3: Financial Self-Reliance

To reach level 3, you need enough cash savings to be able to quit your job at any time.

This should be about six months’ salary, preferably in a separate account.

Having this will create a feeling of freedom and having the luxury to choose. When you get up in the morning, you go to work because you choose to, not because you have to.

Level 4: Financial Independence

To reach level 4, you need to invest and be able to cover basic expenses like food and housing with the return on your investments.

How much do you need?

It depends on both your expenses and the return you expect to make on your investments.

Here’s my method. It assumes that you get a minimum return of 15 percent:

  • You add up your monthly expenses.
  • You multiply that by 12 to get a year’s worth of expenses.
  • Then you take the yearly amount and divide it by 0.08.
  • That’s the amount of money you need to have invested with a minimum return of 15 percent.

A little note here: Not everyone can expect to make 15 percent consistently in the stock market. It requires a method, and for me, value investing has worked well. You can read more about how I invest in my e-book by clicking here.

If your basic expenses add up to $2,000 per month, you need $300,000 invested at 15 percent.

Knowing that you’ll never have to let your kids go hungry or leave your home creates a feeling of security.

But be aware: at level four there is no room for luxuries like parties and vacations.

Level four is meant as an alternative to unemployment benefits.

If you want to include fun and luxuries, you need to get to the next level…

Level 5: Financial Freedom

To reach level 5 you need to create a consistent return that can cover a completely ordinary life with all the normal luxuries like ski trips, birthday parties, and living upgrades.

How much money do you need to live well and have fun?

It’s the same method as above – you just add all the fun and parties to your expenses and divide the total by 0.08.

Why divide by 8 percent if you expect to make 15 percent annually? Because you want to save room for taxes and have a margin of error.

What if you don’t expect to make a consistent 15 percent return on your investments?

What if you invest in index ETFs and expect around 8 percent annual return on average?

Easy-peasy.

You do the same as before, add up your monthly expenses, multiply by 12 to find yearly expenses, and instead of dividing by 0.08, you divide by 0.04.

What do you do when you reach this level?

You can either stop and decide to live comfortably for the rest of your life.

Or you can also choose to advance to the next level…

Level 6: Generational Wealth

At this last level, you have more than you can spend, and you can influence the world by giving to charity.

Did you know that Warren Buffett has donated more than $37 billion to charity? Imagine how much you can change the world with $37 billion.

The family behind the Danish shipping firm Maersk created a fund that donates money every year to things like helicopter landing sites and new football fields. Their most important donation was the Copenhagen Opera House, which was the most expensive opera house in the world at the time of construction.

When you reach this level, you’ll be able to impact the world long after you die.

If you were to set up a fund that donated money, what causes would you want to support?

To learn more about investing, read my e-book. You can download it here.

 

 

Five Ways To Buy More Happiness

Five Ways To Buy More Happiness

There are a lot of blogs and well-intentioned advice about saving, but very little information about how to spend your money. 

How many times have you read or heard that you should avoid buying cafe lattes and invest the money instead?

But what if going to a cafe is one of the highlights of your day?

Why not talk about how to get the most enjoyment and happiness out of your income?

Isn’t that what it’s all about? 

Why save and live frugally for decades in order to one day be able to afford the things you desire? 

 Why postpone the good life?

Here are five ways to get more happiness out of the money that you have right now. 

1. Buy Experiences Instead of Things

Experiences can create far more happiness than material things. 

Let me explain by comparing two different kinds of purchases in my own life. 

I went to an amusement park called Tivoli Gardens with my boys. I took them individually, so I could give each of them a lot of attention and avoid the interest conflicts of a four-year-old and a seven-year-old. I actually did it twice with each kid. That’s four days in a fun park.  

Compare that to the many presents they get around Christmas. They got what they wanted, for example:

  • An electric keyboard – only used three times 
  • A guitar – used even less 
  • Plastic action figures – only played with for half an hour

The Christmas presents have become a nuisance that takes up space and collects dust in our apartment. It’s a reminder of money wasted. 

However, the trips to the fun park remain in our memory, like an Island lit up in the night (I wrote this during a lockdown). 

We often talk about it while tucking in at night. 

We’ll go through all the rides, the lollipops, the cotton candy, the apples dipped in caramel. 

We talk about being afraid and being brave.

We talk about being scared of the bumper cars, but being brave and taking a ride when no one else was on the track (it was a rainy weekday during the pandemic). Gradually driving faster and bumping into the walls and staying in the car when other people got into other cars and bumping into them too and feeling very brave. 

 We talk about how it tickles when you ride a roller coaster. We talk about how beautiful the city looks from the ferris wheel when the lights are turned on. 

We relive those days again and again. 

When you buy experiences like a day trip, a vacation or even just an evening in a restaurant, you strengthen bonds and gain an experience that can change who you are. 

Plastic figurines can’t do that. 

2. Purchase Knowledge

I never try to save money on books, newspapers, or education. 

Knowledge creates a rich inner life. 

 As long as something exciting and enriching is taking place within you, you can manage getting through lockdowns and pandemics. 

The pandemic might pass, but don’t fool yourself.  There will be other times in life when you’ll be required to rely on your own company for various reasons.

 Maybe you get stuck in an airport. Maybe you break a leg or get hospitalized. 

3. Buy Presents for Others

The other day, I received a package. 

It contained candy, chocolate, stickers, a Donald Duck magazine, and a PJ Masks sticker book. 

I was very touched (tears were involved) and the boys were truly ecstatic. 

 When the magazine had been read, the stickers stuck and the candy eaten, we began planning what to send in return.

My kids handpicked the candy and the gifts (colored markers, a coloring book, and the alphabet in stickers). 

They made drawings, figures of beads and modeling clay. They helped me write a letter and put dinosaur stickers on it. 

We were excited as we waited for the package to arrive, and we had to restrain ourselves from calling them every five minutes. 

Days later, I asked my seven-year-old what he liked better. To receive a package or to send a package? 

“To send one,” he said.

That’s how it is. 

 It creates tremendous joy knowing that you’re surprising someone and making their day better – especially if you put some effort into it. 

 When you give, don’t expect anything in return. 

 If you expect something in return, it’s not a gift, but a trade, and that’s different. 

 Give with pure intentions of spreading joy. 

4. Spoil Yourself

 If you love the trip to the coffee shop to get your cafe latte, don’t let some grumpy financial planner talk you into making your coffee at home. 

Buy it and enjoy it. Tell them to mind their own business. 

I’m alone with my boys, and over the course of a weekend, I’m pretty busy cooking and tidying up. 

So, I have an agreement with myself that Monday morning, when the kids are dropped off, it’s my turn. I go to a local cafe and I order breakfast and coffee. 

Then it’s my turn to have someone serve me something and clean the table after me, and honestly… I love it. 

I can look forward to that the whole weekend. It’s my reward.

I’ll sit all alone and read the newspaper or a book, while others wait on me – and no, making the coffee at home doesn’t do it. There’d be some laundry waiting, and it would feel different. 

Whatever you love, buy it and enjoy it.

A little trick might be to plan your pampering for after you complete a task that was a little difficult.

Then it’s waiting for you at the end of your task like a carrot in front of a donkey. 

5. Pay Upfront

Always pay up front (or as quickly as possible).

 There is something about paying before you get the service or product – or just after you receive it – and avoiding credit card payments or installment payments. 

 You pay while the excitement is there, and you look forward knowing that you earned it. 

 If you pay afterward, you don’t really enjoy it that much, because first of all, it’s not really yours yet, and by the time you’ve paid it, the excitement is gone.

 For example, if you pay for a phone in installments, you risk paying off the phone after the screen breaks or the phone gets stolen, and there’ll be some bitterness attached to the payments that seems to go on forever. 

 Besides, it’ll cost you more with installments. Do the math.

 By the way, if you do have some recurring payments, like rent or school tuition, remember to set up an automatic payment so you don’t have to spend time on it and don’t risk missing a payment and getting reminders and fees. 

Balance Between Consumption And Savings

Of course, you can’t just consume without being mindful about it. 

There should be a certain balance between your income and expenses.

Your income should always exceed your expenses, and you should invest the difference. Try to save at least 10 percent of your income. If you can save more, that’s great, but without starving yourself financially. 

If you can purchase what you enjoy, where should you cut down?

I’d look at cutting where it hurts the least. 

Like going through the boring stuff like your insurances and make sure you aren’t double insured. 

You can read one of my blog posts about saving money here, but before you do that, go get that latte. 

Don’t forget to that e-book about making your money grow. You can get it here

 

How to Make a Successful Financial New Year’s Resolution

How to Make a Successful Financial New Year’s Resolution

How did last year’s New Year’s resolution go.

Maybe you just forgot about it as the champagne bottles were packed away and life resumed.

What’s going to make this year any different?

How do you make your decision stick?

No worries, I’ve got you covered. 

Here are ten steps for successful goal-setting to make 2021 your breakthrough year. 

1. Make It Be Measurable and Specific

New Year’s resolutions are often vague. Real goals are specific and measurable.

It’s the difference between saying,

“I want to start running in 2021”

and saying,

“On September 26,, I’ll run the Berlin Marathon in less than 3.5 hours.”

Ask yourself, what specifically do you want to achieve this year?

By how much do you want your fortune to grow?

When talking about investing, it makes sense to set up long-term goals as your primary goals. Let’s say 5-10 years. It makes you less vulnerable to fluctuations in the market. So let’s begin there. 

How rich do you want to be in five years? In ten years?

Be really specific. 

2. Be Ambitious 

Big goals are a lot more compelling.

Cultivate your inner Napoleon. At least your inner Napoleon Hill, the mastermind behind Law of Attraction.

He says that ambitious goals are like strong fires, while small goals are weak fires.

There’s not a lot of energy in mediocre goals.

You have to be a bit audacious to become motivated.

Set a goal. Then double it. Or quadruple it.

How does it feel now?  

3. Have a Strategy 

If you’re training for a marathon, you’d better have a running schedule.

You can’t show up on September 26 and expect to be successful.

You’ll have to know how many days a week to run, when to train intervals, when to train stamina, and when to rest. You need to know what kind of food to eat before long runs. You’ll even have to plan what to wear when going on long runs. 

The same with investing.

You need a plan and a strategy.

How are you going to invest? Which strategy will you follow? Value investing? Passive investing? Day trading? Momentum investing? Copy trading? Pick a strategy. 

You’ll also need to plan how much money you’ll save for investing purposes.

4. Set up Subsidiary Goals

If you’re training for a marathon, it’s a good idea to measure your progress with other running events than the major one.

You’ll want to sign up for a half marathon and even shorter runs throughout the year to see how you fare in a competition and how fast you’ve become.

When you’re investing, you want to measure your progress at least every quarter.

Investing is a slow sport. Kind of like watching grass grow.

You don’t notice any difference from day to day.

But if you take a picture of a plant, you’ll notice a huge difference over time.

So take stock of stocks, so to speak. Track your progress by measuring your wealth. It’s enormously motivating. 

5. Commit Yourself  

You’ll only be successful if you promise yourself that you’ll stick to it whatever it takes.

You have to make that promise to yourself. 

Whenever I’ve accomplished something in life, it’s taken sheer determination and a promise to really do it.

If you’re not committed, like really committed, you won’t have success. It’s that simple.

6. Have a Purpose 

You have to know why you’re really doing it.

Let’s take running as an example again.

Hopefully, you don’t run just for the sake of running.

Hopefully, there’s a bigger purpose, which could be an intent to live a long and meaningful life without lifestyle diseases that could cripple you.

The same with investing.

Ask yourself why you invest. “To make more money” is not an answer. That’s like saying you run to become faster.

Ask yourself why you want to make more money.

When you get a new answer, ask yourself why again. Keep on doing that until you reach the last answer. In the end, you’ll reach your true purpose.

It might be avoiding stress. It might be having more choices in life. It might be securing a future for your children.

The purpose is different for each of us.

For me, it’s a combination of things. It’s about creating generational wealth so my children and grandchildren (to come) can make the best choices without being restricted. It’s also about securing my own freedom and finally it’s also about wanting to influence the world through my investments.

7. Visualize Your Success 

If running that marathon is your goal for 2021, visualize yourself crossing that finish line.

Hear the cheering, feel the sweat and adrenaline. Notice how you feel. How is it going to change your life? Affect your relationships? Your mood? 

If investing is your goal, see yourself reaching your target. Notice how it feels. Who are you going to be when you get there? Reaching goals changes our inner script. It changes who we are psychologically. 

Visualize it until you actually live it. Taste it. Believe in it. 

8. Face the Monster

Avoidance is also a choice.

If you don’t run, you are voting for lifestyle diseases.

If you don’t invest, you are voting for poverty.

Create a worst-case scenario. What’ll happen if you don’t take action? Visualize that too, and decide that it’s not who you are anymore.

I visualize my own diseased mother who spent her last decades on government subsidies, locked in an apartment, suffering from a bad hip and rheumatism. Being unable to afford a taxi, a meal at a restaurant or any extra help. Being very dependent on her children for support.

I’ll never put my boys in that situation.

That’s not who I am.

Therefore, I invest and take care of my finances.  

9. Get Educated       

If you want to run a marathon, you’ll probably read some blogs and books about the best nutrition, the best running schedule, the best running equipment. 

You’ll want to avoid making beginner mistakes that may result in you getting injured and failing to reach your goal of running the marathon. 

The same with investing.

You need information so that you can be the best investor possible and avoid making silly mistakes that could cause you to lose your money.

Ever considered taking an investing course?

Maybe now is the time. It’s money well spent. 

10. Get Some Running Mates  

Running is more fun if you join a club and find people to run with.

The same goes for investing.

You’ll stick to it if it becomes a social event and if you meet people who will hold you to your new standards.

This is another reason for taking an investing course. This is where you’ll meet your peers.

So.

Where does your journey begin today?

Right here with me.

You begin by reading my e-book.

Then you join my Facebook Group

Don’t forget to read my e-book Free Yourself. You can get it here.

 

How to Gift Shares for Christmas

How to Gift Shares for Christmas

Why not give shares for Christmas or birthday presents?

They don’t clutter or take up space, and it’s the type of gift that keeps on giving.

If you select shares in some good companies, they’ll hopefully increase in value over time.

But more importantly than that, you are gifting interest, knowledge, and experience with the stock market.

Hooked? So how do you actually give shares to someone? 

Here are some ways you can do it.  

1. Create the Trading Account and Buy the Stocks for the Person

If it’s your own child or grandchild under 18, it should be pretty easy to set up the trading account and just buy the shares for them. 

Grandparents might need a photocopy of the children’s ID from the parents, but once they have that, they can open a savings and investment account in their own bank and buy shares for the children. 

This is the easiest way to gift shares.

2. Buy the Shares and Transfer Them Electronically

This method is a little more complicated.

You’ll encounter a bit of bureaucracy at the banking level and some high fees, but it’s doable. 

There are options other than old-school transfer today though. There are some apps that make it easier to buy shares as a gift.

You can look up SparkGift, Stockpile, and Public. They even make it possible to buy fractional shares and give them through the apps. 

3. Open an Account and Buy the Stock Together

An alternative is doing it together. You can coach the person through the process of opening a trading account and buying a share. 

If the person is a newbie on the stock market, this is like a double gift: You offer the stock and some basic knowledge about how the stock market works.

Many newbies freeze when they see an online platform because they don’t understand the language. What’s limit? What’s market? They become afraid of doing something wrong, and some people never get past that level. 

You can get them over that hurdle by investing an hour of your time.

4. Give an Investing Course Instead

What about gifting some investing knowledge either along with the stock or instead of giving shares? 

The best investment you can make is investing in your knowledge. The master investor Warren Buffett said something to that effect (the exact quote: “Ultimately, the best investment you can make is in yourself.”).

A stock can fall in price, but knowledge never depreciates in value. After all, it’s knowledge of the stock market that makes you able to make good investment decisions.

Have you considered giving an investing course as a present?

5. Gift the Stock Together with the Physical Product

It might be a little boring to receive an envelope with information about a stock – especially for children.

In that case, what about giving the stock in combination with the product?

Gift Nike shares with a pair of Nike shoes, Apple shares with the new iPad, or Disney shares with an Elsa (Frozen) outfit?

Tell the child, “You own the McGuffin/the gadget/the iPad/the game station, but even better than that, you now own the company that makes it.”

That’ll wake them up. Believe me. I’ve tried it. 

They’ll go, “What?”

Then you can say. “Well. Part of it.”

You’ve got their attention now. Then you give them the envelope. 

If I had bought a share or two for myself and my nieces and nephews for every item they put on their wish list, we would all be very rich by now.

Looking back, I can see now that my teenage nieces and nephew had very good antennas for wonderful investments.

If I had invested in Appple when my nephew was aching to get the first iPod on the market, I would have had a wonderful return (Apple was trading at less than 40 cents a share in 2001). Or if I had invested in Nike when the sneakers were on my niece’s wish list (around 5 USD per share then). Or if I had invested in Amazon when I gave my first Amazon gift card at Christmas in 2001 (around 10 USD per share).

No use crying over spilt milk, but we can do it differently going forward. 

Look at the items on the wish list. Do you spot any companies that are public? Could they be good investments?

How Much Can You Give? 

We usually don’t give taxes much thought when we’re wrapping Christmas and birthday presents, but when you give stocks, you have to be mindful of the tax laws in your local country.

Gifting stocks is like giving money, and the rules are different from country to country. You might incur some taxes, so look up the tax regulations. 

In the US, you can give 15,000 USD without triggering the gift tax (2020).

In the UK, everyone can get a cash or stock gift of 3,000 pounds without triggering taxes (2020). 

Before you get a headache about taxes, just remember, the stock is just part of the gift.

You’re also giving interest and experience in the stock market. 

Don’t forget to download my e-book Free Yourself.  It’ll teach you how to calculate how much a company is worth. You can get it here