The gift that keeps on giving

Published in The Herald Sun, November 2009 by Katrina Barrymore

Millions of dollars each year are spent on Christmas gifts in Australia, some wanted, some unwanted, most disposable and short term.

We asked our personal finance experts for their suggestions for a gift that keeps on giving. 

 With a price range of $200 to $1000 the recommendations include up to $1 million in life insurance, thousands of dollars saved from lump sum mortgage repayments, a lifetime of knowledge through advice and budgeting sessions as well as a kick start to a share portfolio or savings account.

Education

Dale Gillham, Wealth Within, Founder

"I'd buy them an education. I'd go out and get them the best investment and financial books or sign them up for a course.

"To me it's always about teaching a man to fish rather than giving them a fish.

"Yes, you can pay off something but it would be of much more benefit for them to learn how to manage money themselves.

"Education is critical, especially for a young person who will eventually have to manage loans and debt or buy a house or shares in the future. 

Financial literacy is not taught enough.

"I would pick out some good investment books, such as how the financial markets work or buy them a good course on financial management and investing."

Savings

Lisa Montgomery, Resi Mortgage, Consumer advocate

"I don't know any person that would not welcome a financial Christmas present.

"Choosing that gift really depends on the receiver's stage of life. 

For instance, if someone is just starting out and looking to save money for a deposit for their first home, then a high interest at-call savings account might just be the ticket.

"There is quite a bit of competition at the moment between financial institutions for your business, so you can still get a healthy rate at call.

"However, if they're savvy when it comes to the share market you may like to begin a small share portfolio and encourage them to follow the movement; this can be educational as well as a bit of fun along the way and an experience you can continue to share over time.

"If your gift is for someone who is already buying a home then you may wish to pay that $1000 off the top of their home loan - not only are you saving them some interest but providing them with a buffer for that rainy day.

"Another gift could be arranging an appointment with a good financial adviser. 

If your recipient needs some direction and guidance regarding financial health, the value of this Christmas gift could be felt for a long time to come!"

Shares

Lyle Meaney, Dixon Advisory, Managing director investment

"Buy shares in a quality listed investment company with low fees and a good dividend re-investment plan. 

An example is Brickworks Investment (BKI). The company is chaired by Rob Millner and run by his son Tom Millner and it holds a highly diversified basket of Australian shares dominated by quality resource companies and the big banks.

"It trades at about $1.29 but has asset backing of approximately $1.46, which presents good buying.

"Once you've purchased the shares, just put the dividend reinvestment plan on, set and forget.

"It'll basically return whatever the Australian share market makes plus or minus 1-2 per cent per annum.

"When the person finally wants to sell, any stockbroker will be able to help."

Life insurance

Adrian Raftery, Accountants-R-Us, Director

"I THOUGHT about this recently for a wedding present idea. 

I reckon the best gift that you could give to anyone with a mortgage is a life insurance policy ... may sound weird I know... but the policy, up to $1 million, will provide peace of mind for them in case the unthinkable happens.

"There is such a high level of underinsurance in Australia and it may entice them to continue on with the policy in future years.

"If giving to a kid under 18, I would simply put into a high interest bearing online savings account and let them watch the benefits of compounding interest and how money makes money. 

A very good lesson that can be learnt at a young age.

"Otherwise, for a low-income earner then perhaps an after-tax contribution into their superannuation. 

The recipient will also get matching dollar for dollar (up to $1000) from the Government from the superannuation co-contribution."

Debt incentives

Glenn Fairbairn, Hewison & Associates, Finance adviser

"FOR amounts above $500, consider gifting your children a parcel of shares in a listed investment company i.e. Australian Foundation or Argo Investments. 

These are companies listed on the stock exchange and provide investors with diverse exposure to the Australian share market. 

They have an excellent long-term track record, are low cost and do not pay commissions to advisers.

"Or pay for an adviser to prepare a statement of advice. 

Look for an independent fee-for-service adviser who will concentrate on an effective long-term strategy and not product.

"And instead of buying your children a new mobile phone or iPod, establish a savings plan for them which will provide them with a greater long-term benefit. 

From this they will learn the power of compound earnings and the value of savings.

"Or you could provide an incentive to save or pay off debt without doing it for them. 

For every dollar they save or pay, credit-card match it dollar for dollar."

Emerging markets

Ben Potter, IG Markets, Research analyst

"AS Along-term, five, six, 10-year investment gift, we would be looking at the MSCI Emerging Markets Index Exchange Traded Fund as either physical shares or as a contract for difference.

"With Australian investors becoming increasingly savvy and looking further abroad for better market returns, we feel this sector of the market is primed for growth over the coming decade.

"You only have to look at the year-to-date outperformance from the emerging market world to realize that a lot of people are positioning themselves for the long-term growth from these fast-developing economies.

"As with all investment strategies, especially those involving leverage like CFDs, you should always use a stop-loss and money management strategy to help protect your downside risk."