How to Give Money (and Other Digital Assets) as a Gift

Everyone loves money, but not everyone feels great about giving it as a gift. But money as a gift can include a range of ideas, from funds for retirement savings to the means to buy exactly what they'd like for themselves. Invested wisely, money can also increase in value over time.

The process of giving money as a gift is generally easy. You can even transfer your gift directly from your account to the recipient's account. Here are a few strategies and tips for how to give money or other financial gifts to your loved one.

Why Money Makes a Good Gift

Money can make a good gift for nearly anyone because it can be used for many purposes, from investing to buying a product. You could give a gift of money for many occasions, such as for birthdays, holiday presents, graduation presents or wedding gifts. Money will allow the recipient to get exactly what they'd like instead of what someone else chooses for them.

A gift of money can help a younger person learn about how money works. They could budget the money and learn about saving and spending strategies. Or they could learn lessons in investing. Ultimately, money can be used to help anyone achieve their financial goals, whether, for example, they are saving for a major purchase or building a retirement account.

Different Methods to Give Money

Two main ways to give money are to give it in person or to send it to the recipient online. You could also send money through traditional mail, but this method entails a higher risk that someone may intercept it. Let's look at your options for giving money in more detail.

Giving Money in Person

You can give money directly to someone in several forms using a card or envelope or simply handing over the funds. Here are three ways to give money in person:

• Cash Gifts: You can use cash bills to give money in an envelope or in another creative way.
• Check or Money Order: Using a check or money order adds a bit of security to your cash gift because only your intended recipient can use it. In contrast, anyone who intercepts cash bills can use them.
• Gift Cards: Gift cards—also called stored value cards—can be a more personalized way to give money because the money must be used at a specific retailer. So, if you'd like to give someone clothes for a gift, you can get a gift certificate to their favorite store instead of choosing an item they may not like or that does not fit.

Sending Money Online

If you can't hand the gift to someone in person, you can consider sending the money online.

• Using Apple Cash: With Apple Cash, you can send and receive funds on your phone with Messages or Wallet. You can choose who you want to send money to and choose the amount.
• MoneyGram Online Transfer: MoneyGram is an app that can help you send money internationally. You can send currency transfers and easily check exchange rates and fees.
• Western Union Online Transfer: You can also use a Western Union transfer to send money abroad. In addition to sending money online, you can use Western Union's app or visit one of its locations.
• Other Money Transfer Apps: You can use many other apps to transfer funds to another account holder if they have the app as well. For example, you can use Venmo or Zelle to send funds to someone and include a note. The recipient can then transfer the funds from Venmo to their bank to use as they like.
  

Tips for Giving Money

When you give money to someone, you'll want to keep a number of factors in mind.

Safety Precautions

Giving money often entails certain risks, such as theft or fraud. To better ensure your money goes to your loved one, you can take some steps to protect it. First, try to avoid sending money in the mail. Thieves often target mailboxes, especially around the holidays. If your card with cash is stolen, anyone can use the cash.

When you send money online, choose a reputable company to make the transfer. Many established money transfer apps like PayPal and Venmo use encryption to reduce fraud and help you send money securely.

Tax implications of Giving Money as a Gift

Before you give money as a gift, consider all the tax implications for you and for your recipient. The amount of tax you may have to pay will depend on the value of the gift. Tax implications can include a potential annual gift tax, lifetime gift tax, or capital gains tax.

Annual Gift Tax: If your gift is worth more than the Internal Revenue Service (IRS) limit, you will be responsible for paying the gift tax. For 2024, you cannot give more than $18,000 (or $17,000 in 2023) without paying taxes on the excess. However, you can give up that amount to multiple people. If you give over that amount, you will need to report it to the IRS using Form 709. The IRS changes the gift tax annual exclusion limit regularly.

Lifetime Gift Tax: The IRS also limits how much you can give in your life time without incurring a gift tax, although most people do not reach this limit. For 2023, the lifetime gift tax exclusion is $12.92 million. For 2024, that amount is $13.61 million. If you have given gifts worth more than this amount over the course of your life, you will be responsible for paying the federal gift tax.

Like the gift tax, this amount is adjusted for inflation each year. If the amount of the estate passed on exceeds the lifetime exclusion limit, the executor of your estate will need to report it and file Form 706. The Tax Cuts and Jobs Act (TCJA) more than doubled the lifetime gift tax exclusion, and those provisions are set to expire in 2025.

Capital Gains Taxes: The gift recipient will be responsible for paying capital gains taxes whenever they sell an asset such as a stock or a bond. For 2023 and 2024 tax years, the capital gains tax rate is usually no more than 15% of the gains for individuals.

Creative Ways to Give Money as a Gift

Money may seem like an impersonal gift, but there are countless ways to add a special touch, from using a unique package to including a thoughtful message. Try one of these creative ways with your gift:

• Include a heartfelt note
• Fold money creatively
• Attach money to another gift
• Create a money tree
• Add money to a personalized gift
• Use a puzzle box for the recipient to solve with the money inside
• Create a scavenger hunt game with the money as a prize
  

Other Ways to Give a Financial Boost as a Gift

If you want to go a bit beyond giving money as a gift, you can give digital assets like stocks or bonds. Let’s look at some of the common asset classes that may be suitable to give as digital gifts.

Stocks: Stocks are shares of ownership in a company and they can be gifted that match your recipient’s hobbies, interests, or values. The value of a stock is affected by the company's performance and broader market conditions.

You can give someone stocks in several ways, including by: transferring shares from your brokerage account to your recipient’s, using an online app specializing in stock gifting, or gifting shares directly through the company. Anyone who receives stock will need to have their own brokerage account.

Bonds: Bonds are debt issues. You earn a fixed income as the company or government repays the debt with interest. The gift of a fixed-income investment can provide predictable payments with lower risk than other assets like stocks.

There are several types of bonds. Corporate bonds generally require a high minimum investment, so many gift-givers turn to U.S. savings bonds. Because they are backed by the U.S. Treasury, savings bonds are considered a low risk investment. You can buy a savings bond for as little as $25 from the TreasuryDirect website and then transfer the asset to the recipient’s TreasuryDirect account.

Exchange-Traded Funds (ETFs): An exchange-traded fund (ETF) is a pooled security, which is made up of a basket of different investments. This can be a great alternative to stocks and bonds, which give the recipient a stake in just one issuer. When you give an ETF as a gift, your recipient gains exposure to a particular asset group but with more diversity than buying a single stock.

Gold or Silver: Precious metals can be a great way to store value and provide benefits when the economy is unstable. If you want to give a digital gift of gold or silver, you may want to consider gold-focused ETFs or shares in mining companies. You can give bullion, coins, or jewelry. But remember that there are costs associated with delivery, storage, and insurance.

Cryptocurrency: Cryptocurrencies, even with their notorious volatility, can make excellent gifts because the recipient can receive the potential for significant gains without risking their own money. If you’re comfortable giving an asset with a high level of risk, these digital assets are fairly easy to buy and gift to someone else.

You can buy assets through a cryptocurrency exchange and then transfer them to your recipient's digital wallet. Some sites offer cryptocurrency gift cards that your recipient can then redeem. The new cryptocurrency owner will need a way to store the keys to the digital gift—the safest of which is keeping the asset offline, where it is less vulnerable to hacking and theft.

Non-Fungible Tokens (NFTs): An NFT is essentially an online digital file made available for exclusive ownership. Like cryptocurrency, NFTs are highly volatile and speculative investments, with a value that is based exclusively on what another buyer might be willing to pay for it. If you can tolerate the risk, NFTs could make an appealing gift because they are unique collectibles.

The general process of gifting an NFT involves buying the asset from a marketplace, then transferring it to the recipient’s NFT wallet. The specifics may differ based on the NFT marketplace you use, which, in turn, vary based on their processes and the types of NFTs that they offer.

Credit Card Rewards Points or Miles: If you are looking for a present for an avid traveler, one digital asset that you could consider is your credit card rewards points or miles.

With most types of credit cards, you cannot transfer your rewards or miles directly to someone. Instead, you can redeem the points for frequent flyer miles and then transfer those to your gift recipient. You also may be able to use your points to buy gift cards or other merchandise that you can give as a gift.

The Bottom Line

You have myriad options when shopping for a gift, but money is one type of gift that can benefit anyone and can be given in many situations. If you want to give money, consider whether you will give it in person or send it to them online. Keep all the tax consequences of giving money in mind, especially if you are giving large amounts. While giving money may not seem like a personal gift, you can use unique and creative strategies to give your loved one money in a meaningful way.