It’s easy to get stuck in short-term mode. Especially when you’re juggling family life and accruing new expenses like your tween’s cell phone plan or your parent’s home health visits.

Wouldn’t it be nice to have a financial fairy godmother (or godfather) to grant you just a few more hours in a day to focus on the long-term? While that may never happen, you could play the role to those little ones in your life.

One way to help launch a child into adulthood on sound financial footing is to open what’s called a custodial account through your brokerage. And, why not wrap it up and put a bow on top?

Whether you’re celebrating a child’s birthday, a holiday, or some major milestone event, here’s why opening a custodial investment account now can be the one gift they will thank you for someday.

The One-size-fits-every-kid Gift

One of the great things about gifting stocks, mutual fund shares, and bonds via a custodial account at a brokerage like Ally Invest is that any child (yours or someone else’s) can receive them.

Custodial accounts also eliminate the worry about getting the right size or picking out something that’s age appropriate. They also remove the pressure of trying to find something for those hard-to-buy-for kids. You know the ones. They either have two of everything already or they’re suuuper particular about what they like (or don’t).

Some get better with age.

One of the more frustrating things about presents is that some just don’t hold up well over time. You know the drill: something breaks, the batteries wear out, they’re put on a shelf and forgotten about, or the recipient outgrows them.

A custodial account, however, can be a gift that keeps on giving, year after year.

Say you invest a custodial account’s holdings in various stocks. Certain ones pay a dividend, which is a share of the company’s earnings. This is separate from any returns a stock generates if it climbs in value.

Dividends can be paid quarterly or annually. A recipient of dividend stocks can get those payments in cash or use them to buy additional shares by enrolling in a dividend reinvestment program (DRIP). Choosing to reinvest dividends causes the number of shares to increase from the original purchase amount, effectively giving a bonus present. Over time, the number of shares in the account can increase greatly when enrolled in a DRIP.

The timing’s always right.

One question you might have is, “Why would someone want to receive a custodial account anyway?”

The answer is simple. Gifting a custodial account can help the recipient meet two important investing priorities: college and retirement. The longer he or she holds on to the account, the more the money can grow.

There’s never a bad time to gift a custodial account to someone. You can give one to younger kids to pad their college savings accounts. Or you might want to gift a custodial account to help someone jump start a retirement nest egg.

A Gift for Yourself, too: Security and Tax Benefits

Taking the guesswork out of buying presents is a solid reason on its own to consider adding stocks to your gift rotation. But gifting investments can yield another valuable benefit once the April tax filing season rolls around.

The IRS allows you to deduct stock gifts when they’re donated to qualified charities. You have the ability to transfer holdings in your Ally Invest portfolio to a charity (note: fees are involved with this type of transfer), and as of 2018, gifts of stock are deductible up to 30 percent of your income.

Deductions are good because they lower your annual taxable income. The less income you have that’s subject to tax, the lower your tax bill (or the bigger your refund) is likely to be.

In giving stocks to a charitable organization, you also get something in return (pun intended). And who can say no to that?

Stocks might not be what your recipients are expecting, or they might be a little outside-the-(gift) box for you. But once you weigh the benefits—both for the child you’re giving stocks to, as well as yourself—you might realize that putting a bow on some stocks can be the ideal gift choice.

How to Open a Custodial Account at Ally Invest

For now, you will need to open the custodial account in your name. To get started, you need to choose between Ally Invest Self-Directed Trading, where you determine the account’s investments, and Ally Invest Robo Portfolios, where financial professionals and an automated platform will help you select investments based on your goals, risk tolerance, and time frame.

During the account opening process, you will get the option to select custodial account as an account type.

Then, just complete the steps of setting up the account. Once your account is approved, don’t just set and forget it! Be sure to update your account based on your risk tolerance and life changes throughout the years. Later down the road, when the child reaches legal age 18 or 21, depending on state law, and assumes ownership of the account he or she just may thank you with a big smile and hug.

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Originally published December 2018