Money 101  >  Money Myths

"Cash makes the best gift."

POSTED ON December 05, 2019

The myth

The season for giving is here! Every year, we get reminded that finding out what people want for Christmas can be a little difficult, especially if you want to surprise them.

Cash tends to be the default choice when we don’t have the time or energy to look for something more thoughtful. As a gift, money is a step below a preloaded gift card for the recipient’s favorite store, but is still more personal than generic items like chocolates or cookies.

If you’ve set your mind on giving money to someone and the amount will be significant, consider helping the recipient invest it instead. That way, they end up with a gift whose value may probably increase with time. This is also a good opportunity to share what you know about good financial practices, so they can already learn how to take care of money instead of just spending it.

One thing to remember is that, for the most part, you cannot directly invest on behalf of someone else unless that person is a minor and you are one of his or her parents, or legal guardian. To give most types of investments, you need to involve one of the parents or the guardian in the process. This can be a little painstaking, but may be more rewarding down the line.

Time deposits are the only exception to this rule, because you can open a time deposit in someone else’s name.

If the receiver is a legal adult, you can work with him or her to choose the investment that fits the risk profile and the amount that you will be giving.

Why do people believe it?

Although cash can be a rather impersonal gift, it does have the advantage of allowing the receiver to get stuff that he or she really wants. It minimizes the chances that they’ll end up with stuff that they don’t really want or can’t use, or things that don’t fit well.

For you, little effort is actually required to give money, so this also makes it an attractive present. No research, no trips to the mall, no real consideration required!

Risks of believing this myth:

Giving cash means that the recipient will lose out on the potential opportunity for even greater gains through investing.

Instead of giving money, which could be seen as rather low-effort and impersonal, why not give a present that grows through time? That would be a good way to show how much you really care about his or her future.

Verdict: Not necessarily.

While cash is a versatile and universally appreciated present, it may also be seen as a low-effort and rather impersonal attempt at gifting. If you’d like to give something that has the potential to increase its value down the road, consider an investment instead.

If the receiver is a minor, don’t forget to work with one of his or her parents or guardian to get things in order. You can skip this step for a legal adult, and go straight to looking at the suitable options. Time deposits are suitable for people of any age.