Rule Breakers Presents: Foolish Tips on Financial Gift-Giving

On this segment of a very special Rule Breaker Investing podcast, Motley Fool co-founder David Gardner gets back to the business of investing, but with a holiday's related spin: financial gift-giving. It's advice that suits this season, and any season, and to guide him through the details and different options is Mohna Shah, director of operations for Motley Fool Wealth Management -- a sister company of the Motley Fool. But she's not picking specific assets -- this is more about approaching such gifts with the right philosophy and mindset. And that can include gaining and sharing knowledge about finance, both generally and more personally.

A full transcript follows the video.

This video was recorded on Dec. 13, 2017.

David Gardner: It wouldn't be a Motley Fool Gift-Giving Special if we didn't talk a little bit about financial gift-giving and gift-giving writ large. It can take different forms, and here to help us think through that is Mohna Shah. Mohna is the director of operations for Motley Fool Wealth Management, which is a sister company of The Motley Fool company that I work for and that Rule Breaker Investing, the podcast comes from. Mohna, a delight to have you with me.

Mohna Shah: Thank you so much!

Gardner: So obviously, a couple of tough acts to follow, but I know you're worthy of it. Because it's one thing to say, "Do this or that," or with Chris Hill, walk through on Dec. 24, local stores. But it's another thing if you're thinking about financial gifts this time of year that might be appreciated or might be efficient or just a good thing to do.

So Mohna, start us off with your first one, but before you do I'll just mention one of my childhood memories -- it was more around birthdays than, let's say, the holidays, but for some reason I would get a gift card and it would have dimes stuck in little slots in it. Now, dimes don't really work as much these days anymore, but that was my memory. When I think of financial gifts in my own youth, it was flipping open a gift card and there were little dimes inserted in the slots, so it may have been $1 or something like that. That definitely was one form of a financial gift. What do you want to kick us off with?

Shah: Well, I think it's important to package these gifts. Any financial gift is not likely to be flashy. It's not going to be the thing that somebody opens up on Christmas Day and it's just like, "Wow!"

Gardner: Unless it's a huge check.

Shah: Right.

Gardner: But we're not going there today.

Shah: Serious money. But no, this is a little bit different.

Gardner: It's not flashy.

Shah: It's maybe considered a gift to future Jane or future Johnny. It's also important, when we're talking about financial gifts, not to gift an obligation. I totally appreciate Cheryl's suggestion earlier about sharing your passion. If you do that and you don't get great feedback, maybe don't force it. Recognize that there's another way to the ultimate objective.

Starting off, I would say if you've done the share of stock of Disney, or The Motley Fool Investment Guide and it didn't take very well, maybe consider opening up a regular brokerage account at a firm for them and buying them an index fund or ETF, knowing that what they have is time. They don't have to monitor that investment day in and day out. It's something where they can grow it at their own pace. They can add other funds. Maybe they decide to add some stock or maybe they decide to open an IRA in conjunction with that. But that's a great way to give the gift of exposure and get over that first hurdle of investing.

Gardner: Yes, I hear you, so Mohna, where you're headed with that -- I'm thinking about my conversation with Joe Perna recently on this podcast where we talked about stock gifting. I'm certainly a fan of the idea of giving some shares to a child, but you're pointing out that not everybody wants to be a stock picker or has the time, so maybe just that index fund, which can be, in the best way, kind of a brainless thing that they can add to over the course of time. That might be, for a lot of people, a very fine way to start them.

Shah: Absolutely. And the other thing is we know you can add to that every month if you choose to, by automatic deposit, and then it grows in perpetuity. And again, it doesn't require any more brain cells a month from now, which is something that people want to avoid for people who are not big fans of investing.

Gardner: I understand. That's No. 1.

Shah: The second one is about the motivation and maybe what led you to investing in the first place, and that's to share either in a dialogue or in a letter what motivated you to get into this in the first place. What are your hopes and dreams as far as what the investing will do for you? What the investing will do for your kids.

Most families don't talk about money very often, or if they do there's a lot of awkwardness around it. I think the gift of having that conversation -- about what it was like when you were a child and what drove you to take a certain path -- is a really important conversation to have. I know that as a daughter of immigrants, for me it's incredible to know where my grandparents started from. Where my parents started from when they moved to this country. And knowing that, I'm a lot more motivated, myself, to keep things going in that direction.

Gardner: Wow! I'm trying to see how this looks as a gift. I guess a written letter, which is the sort of thing that somebody might save forever.

Shah: That's what I was envisioning as the best way to do it, because it also takes away that awkward opening line of how to do the dialogue that's a little bit like the birds and the bees conversation sometimes. I actually think that a letter is a little bit like opening up a diary, but one that you're OK with your kids or your grandkids seeing. That's so personal and probably gives them some insight into the person you are that is not just a parent or not just a sibling or something. It's a real part of you.

Gardner: That could be deeply meaningful. I see what you're saying. For some families, they do have a culture where they're a little bit more open. So maybe this one is over hot apple cider a little bit. Maybe it's not a gift. Maybe, as you said, it's just the word "dialogue." And maybe it's not right there on the big day -- Christmas or Hanukkah or whatever. Maybe it's two days before or two days after, but family times. Family opportunity.

Shah: Absolutely. It's so important, whether it's keeping up with your parents' plans for retirement, or your kid or grandkids' plans for college. Those are all really great financial conversations to have while you're in proximity as opposed to text or over the phone.

Gardner: Those are two good ones, Mohna. Do you have a third?

Shah: I do. I think it would be great if people found a financial literacy class or a financial planning seminar to attend. If you're somebody who's already well versed in finance and investing, I think the best thing to do is offer to attend with them, or offer to excuse yourself and let them go on their own so that they have the freedom to ask questions. They may be intimidated by somebody who's as knowledgeable as you. You want to give them the personal space to be open about that and not intimidated in that space. Even if you're the nicest person, that knowledgeable person next to you can make somebody feel very inhibited.

Gardner: It comes down, obviously, to the recipient in this case. Would they particularly value you going with them because they're like, "I'm scared to go to some financial seminar on my own." Or maybe this is a time where you're showing them that it's time for them to step out. You're setting them up, but you're setting them up to be more independent minded. It comes down to them.

Shah: Yes.

Gardner: Did you ever receive a gift like this, by the way? It sounds good, although I'm picturing somebody opening this up on a big holiday, and it's a financial seminar at the community library at 7 p.m. next Thursday. Does it need to make this person happy?

Shah: I don't think we're going for happy, and again, that's why I put out the disclaimer that this is not your "shazam" gift. It's not the wow gift. But when I say it's not for happiness, there's a quality of being content, and I think this is something that's a catalyst to get to content.

Gardner: I like that. Yes. It's not going to sparkle or glitter. It's not going to make noise or hop around on its own. This is something, though, that at the right time for the right person, something that they will deeply benefit from and give them a sense of contentment looking backwards and have you remembering that Mohna said this on the Rule Breaker Investing podcast. It all worked out really well and you wouldn't have thought of it otherwise.

Shah: Correct. I never had a specific class, per se, but my parents set an incredible example of finance and behavior, and I think that's what I took away from it, was being able to follow that intimate setting where other people, I think, have to look. Not everybody has the luxury of having parents who are so instructive in financial behavior.

Gardner: You bet. All right, Mohna. For each of our previous panels, I had my final question for them. For you I'm just going to say, "Do you have a bonus fourth?"

Shah: I do. One of the best things that my parents did for me, that I didn't appreciate at all at the time, but the twentysomething and thirtysomething Mohna vastly appreciates is my parents gave me a credit card when I was in high school. They were the ones who were paying for it, so they saw all the transactions. They would never let me go above the limit. That allowed me to build credit and learn how to treat a credit card.

David, I was in my 20s before I understood how a debit card worked, because I had always treated a credit card essentially as a debit card. I could never spend more than I made. That, alone, made me stand out from my peers in their 20s who were learning the hard way about credit card interest rates and how to spend within their means. I know for parents it feels risky, but I think a credit card is a great gift of independence.

Gardner: Awesome! Mohna, thank you for all four ideas. I knew you were going to bring them, and sure enough you did. And if I'm a listener, and I'm hearing about Motley Fool Wealth Management for the first time, or I might have a follow-up based on something you said, how can I reach you?

Shah: You can go the website www.foolwealth.com. We have a team of financial planners, and we are always happy to help people.

Gardner: Awesome! Happy holidays! Season's greetings. Thank you, Mohna Shah!

Shah: Thank you, David!