The gift that keeps on giving

BY TAMEKA GORDON Assistant business co-ordinator

Sunday, December 23, 2012

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THE gift of an investment or savings account may not elicit squeals of glee from your children this Christmas, but they could inspire a lesson in financial planning.

Giving the gift of financial assets can place your loved ones in a better position to meet life's challenges plus teach some valuable lessons, according to experts.

"Financial gifts may not provide that instant gratification that a toy may give to your child, but they may teach one of the most valuable lessons a child could learn; to think long term," said Joel Gordon, BCW's Capital markets manager.

So, while the shopping malls and stores are now abuzz with holiday shoppers seeking that special gift for their loved ones, investment experts advise that the best gifts are those that appreciate over time.

"A sound investment option is always a good choice for helping family and friends achieve financial stability, but knowledge of the risk appetite of the individual should guide the choice of instrument," Gordon said.

In an age where change is the only constant thing, financial security should be a key concern for all.

So instead of buying that toy or book, which will just gather dust on a shelf or table for the rest of the year, consider setting up your loved ones financially.

Considering the age and personality of the receiver is always wise when deciding on the suitability of financial gifts said Charles Ross, managing director of Sterling Asset management.

The investment advisors note that there is a financial product for every aspect of the life cycle, so with some research on the various products the selection should not be difficult.

By Ross's reckoning, mutual funds are among the more conservative instruments that offer good growth potential making them good gifts for elderly individuals.

"Mutual funds are income generating and do not have much risks associated with them, so they would make a good gift to a parent," Ross explained.

"The interest returned on mutual funds is good," Gordon agreed, adding that their diversification and pooling of funds make them fairly sound and less volatile than other instruments.

Critical illness coverage is also a good choice for a gift to a parent, according to Beris Grey.

"Unlike life insurance policies that are more beneficial to the surviving family members on the passing of the individual, critical illness coverage gives the receiver a living benefit," said the senior vice-president, origination and capital market at Scotia Investments.

Critical illness policies are offered by life insurance companies and while, they still offer death benefits, essentially are a means of relieving your loved ones of financial burdens which may arise with the uncertainty of health.

With youth in their favour, younger individuals tend to have a higher appetite for risks, so a gift of stocks or bonds may be more suited for them the experts advise.

"Quality equity blue chip stocks are good choices for the young," added Ross. "Equity is more volatile, but they have good growth potential."

But a careful look at the personality of the receiver is crucial since not all individuals are risk takers.

These choices should, however, not be made without keen research of the types and returns of the various instruments, the experts caution.

Real estate ranks highly on the list of financial gifts to boost the financial standing of your children.

"While not many people in Jamaica can afford to do this, buying your child an apartment and puting the proceeds from the lease or rental into a savings account or trust fund, is a good gift," said Grey.

He added that this would "free up financial resources" which your child can then channel into entrepreneurial endeavours or to launch out on their career path.

A fixed deposit, which can only be terminated when your child is ready to purchase his or her home, is another option for those who are not able to purchase real estate, Grey advised.

The value of a savings account for young children must never be discredited.

"We need to cultivate a culture of saving in our children, and the younger we start them off the better," said Gordon.

Though savings accounts are funded by the parents in the onset, they encourage a habit that can put our little ones on track for financial success.

So, though Christmas may be seen by many as the season of excess and lavishness, restraint, research and a bit of financial prudence could bring a more prosperous new year.




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