Not too long ago, Becky and I were invited to our nephew’s first birthday party back in Chicago. While we weren’t able to make the trip back home, we did want to send a gift but didn’t want to go with the standard clothes and toys option. His parents were insistent that they already had plenty of those anyway and I imagine this is a common problem for parents of young children. Plus, it’s hard to make a lasting impression with something that will be added to a growing collection of toys and may hardly ever be played with. We were hoping to find something more meaningful.
Cash came to mind, but also felt like a weird option for a 1-year-old, but that will honestly depend on what the parents do with it. Will they save it in a bank account they open for the child? Maybe invest it for their future college fund? Possibly spend it because no one would be the wiser?
While I would never expect our family to simply take cash given to their children and spend it on themselves, we were luckily able to come up with a much better option! I was thinking about what I might do with cash gifts for my future children and determined that I would probably open up a custodial investment account in their name and buy index funds that could grow for years before they might ever have a use for it. Even before I let them spend it at an older age, it would be neat to show them statements from their own investment account when explaining investing and how the stock market works. Eventually, they would be able to use the funds in the account for a first car, college, or maybe just keep it going as their first step towards achieving FI for themselves (a parent can dream, right?).
In order to set up this same sort of potential situation for our nephew, I started looking into ways to give the gift of stock. While there are a few different ways to give stock out there, the one we finally settled on was Stockpile. They made the entire process very easy, both for sending the gift and letting the receiving party redeem it. Below, I’ll review our experience with Stockpile and go over some of the different options and potential fees.
If you stick around until the end, I’ll share a link that will let you open an account for a free $5 in any stock that they offer!
How Stockpile Works
Stockpile is set up as a very easy to use entry in the world of investing, specifically targeted at people who want to gift stock to others. In particular, they make it very easy to set up a custodial account for children, often a common receiver of stock gifts.
Different Ways to Gift Stock
While Stockpile also allows you to purchase stock for yourself, the best part is being able to gift stock to other people! They currently offer two major ways to gift stock, physical gift cards and e-gifts, both of which work much in the same way as giving someone a regular gift card with a small exception, fees (which we’ll get more into below).
Physical gift cards can either be purchased on the Stockpile website or in a local store that has a gift card rack (grocery stores are a common example). These are ideal if you actually want to hand the person something tangible or maybe include it in a greeting card as a part of the gift.
E-gifts on the other hand can simply be emailed to someone and redeemed online without having to exchange anything in person. E-gifts are a little bit cheaper than physical stock gift cards.
For either of the two options, Stockpile offers hundreds of different stocks. These range from individual stocks of all the big companies you’ve probably heard of in addition to my favorite way to invest, index funds!
Their ETF’s also include options that might not immediately come to mind as a “stock” such as real estate and commodities such as Gold.
How Gifting Stock Works
Instead of buying a single share of stock or any particular portion of stock up front, you instead choose a dollar amount of the gift that will eventually be redeemed for stock. This means that the recipient of the gift will most likely end up owning fractional shares of whatever stock they redeem the gift for. This is great because you can gift any dollar amount you feel comfortable with instead of being required to gift whatever your favorite stock happens to be at on a particular day. For example, you couldn’t give the gift of Google stock right now unless you forked out ~$1,000 up front!
Let’s walk through an example of giving someone $50 worth of stock.
- First, you will decide which stock you want to gift (or just choose a generic “stock” gift and let them decide), how much, and what kind (physical or e-gift).
- Let’s choose my favorite Vanguard index fund ETF: VTI, $50, and e-gift.
- After checking out and paying the appropriate fees on the $50 stock gift, I can then enter the recipient’s email address where their code to redeem will be sent.
- The stock gift recipient (or more likely his or her parents!) will then get an email letting them know that I gave them $50 worth of VTI including information on how they can redeem it.
- At this point, the recipient (or their guardian) can sign up for their own Stockpile account by entering the necessary information.
- Once they finish setting up the account, they can confirm the stock purchase and possibly start their first ever investment!
- It appears that it is also possible to change the stock that the gift giver chose and/or convert it into a retail gift card if desired (which kind of defeats the point and just became a really expensive retail gift card!)
- Upon redeeming, the amount of the gift will be converted into a real number of actual shares of stock at the end of market that day.
- Now the stock gift recipient is invested in the stock market and can watch their account balance go up and down with the market!
- Hopefully someone is around to teach them not to panic sell when the market is down!
It is not necessary to create your own account in order to send a stock gift to someone else.
Stockpile Gifting and Account Fees
Unfortunately, it’s inevitable that a service like this is going to have to charge fees for the ability to buy and sell real pieces of stock. Luckily, they put the majority of those fees up-front in the gifting process and don’t charge any shady fees to the recipient to redeem or keep the account open.
The cost for physical stock gifts depend on the amount you are buying and come in the form of a fixed fee on top of the gift amount (this is similar to the way VISA gift cards work).
- A $25 physical stock gift will cost $29.95
- A $50 physical stock gift will cost $56.95
- A $100 physical stock gift will cost $107.95
In addition to the actual cost of the card, you may also be charged a shipping fee if you purchase online depending on how many gifts you purchase at once. You can avoid this shipping fee by using their store locator tool to find a store near you to purchase the gift.
To save extra money on physical stock gifts, try to buy them at a store with a bonus spending category on your credit card. For example, my local Lowe’s sells Stockpile gift cards and my Discover It card earns 5% back at home improvement stores this quarter. If it’s your first year of having the Discover It, they will double the 5% category to 10% which means you can completely offset the purchase fee on the $100 stock gift!
The cost for an e-gift on the other hand has both a variable and fixed component. The fixed charge is $2.99 for the first stock gift and an additional $0.99 for each additional stock in the same order. The variable cost is a 3% additional charge on the amount of the stock gift.
- A $25 e-gift of stock will cost $28.74
- A $50 e-gift of stock will cost $54.49
- A $100 e-gift of stock will cost $105.99
As you can see, the e-gift option is a little cheaper than giving physical gift cards unless you’re able to find a place to buy them with a large credit card category bonus.
Other than the up front fee for purchasing the stock gift, the only other fees are for making buying or selling actions within the account. Redeeming a gift card and converting it into stock is completely free for the gift recipient, but if they decide to purchase additional stock for themselves or sell the stock in the future, they will be charged a $0.99 trade fee.
There are no minimum balance requirements, no monthly account fees, or anything else that I could find that would cost something to keep the account open and active. Even re-investing dividends is completely free (but you may have to enable it as you’ll see below).
Stockpile will let you continue to reinvest dividends for free, but I don’t believe this is the default option. If you are setting up an account and want to reinvest the dividends (which I highly recommend), then be sure to go into the account settings and enable the “dividend reinvestment” option. Otherwise, I believe any dividends will go into the account as cash and it will cost money in order to use that cash to buy additional stock.
Why We Chose to Use Stockpile
Despite the fees that come with giving stock as a gift, we decided it was worth it for our own situation. We weren’t able to find a cheaper way to give stock other than giving our nephew cash and putting the burden of setting up a custodial brokerage account on his parents. Of course, his parents did need to open a custodial account on Stockpile, but they make the process very easy according to my brother-in-law who went through the steps.
Based on what I’ve read about opening custodial accounts with traditional brokerages is that it can be rather tedious and often involving physical forms that need to be mailed in or scanned. I’m sure I’ll find out more about this in the future when I eventually open an investment account for my own children. Maybe I’ll find that Stockpile is the easiest option for that as well!
Another reason we liked Stockpile compared to a different website we found is that we could buy index funds, our own preferred method of investing. In an ideal future world, my nephew will ask me what the hell this VTI thing I bought him is and I can explain the complex world of investing in the stock market, setting him on his own path of responsible long-term investing. More likely, I’ll get one sentence into the explanation and he’ll get bored before running off to play with toys or something. Oh well, maybe he’ll appreciate it more when he finally gets to cash it out for something significant.
As for what our gift might grow into, let’s look at the possibilities. After doing a quick head-count of Becky and I’s siblings, we decided to be a little generous as an aunt and uncle. On our first nephew’s birthday, we gave him $100 of VTI and plan to do the same for all of our future nieces and nephews. On his second birthday and beyond we plan to add an additional $50 to the gift. We haven’t decided yet if we’ll adjust this amount for inflation or not!
Assuming the stock market as a whole returns ~7% per year going forward (which is close to the historical average after inflation is taken out), our initial gift of $100 with an extra $50 added each year should grow into ~$1,850 by the time they turn 18! That’s almost double what just keeping equivalent cash gift in a savings account would yield (~$950)!
We’ll most likely stop contributing anything once they turn 18, but if they just let the account grow until their own traditional retirement age of 65 (we’re in the year 2080 now by the way), it would continuing growing into ~$45,000! And don’t forget that’s still in today’s dollars.
Now, Open Your Own Stockpile Account for a Free $5
Now that you know all about Stockpile, hopefully you’re in the investing mood. Stockpile is currently offering a completely free $5 gift card for opening a new Stockpile account, no purchase necessary. Previously, I’ve seen referral offers of $5 for purchasing at least $10 in stock, but this promotion acts exactly like someone sending you a $5 gift of stock. There’s not even any fees to redeem it and get started!
After following the link below, you can choose from Stockpile’s hundreds of stock options to get started with your own $5 investment for free. I’m partial to VTI, Vanguard’s total stock market index fund ETF myself, but it’s up to you to pick your own investment strategy.
Even if you don’t plan on using Stockpile as your regular brokerage account, it’s hard to turn down a free $5. Personally, I think I’ll gamble on an individual stock and then maybe forget about the account for the next few decades. Maybe I’ll stumble across it when I turn 60 and find out that my $5 has turned into $500 or more!
As this promotion seems to work like a normal Stockpile gift card, it might be possible to instead convert it to a retail gift card if you would rather not invest it. You’ll have to let me know in the comments below if you try it.
* If you do decide to open a new Stockpile account for the $5 promotion, I may receive some kind of compensation. Thanks in advance if you decide to try Stockpile out using my link!