Giving 'Money' Gifts
I have a friend who has a lot of credit card debt. She wants to start investing but knows she should pay off her debt first. For Christmas, I'd like to help her with her financial situation. Should I buy some sort of investment for her as a gift? If so, what? Or is there a way I can make a payment on her credit card?
A Book to Help Paying Off Debts
I would recommend doing neither of these options. Instead, purchase a copy of Mary Hunt's Debt Proof Living for your friend and strongly encourage her to read it and put it into practice. It is very easy to read, to use, and incredibly helpful in paying off debts and then in getting started investing.
Long Term Benefits
Yes, you can make a payment on her credit card provided you know her account number. All you have to do is send a check to her credit card company with her account number on it and they will credit it like any other payment received. Usually of course when you pay the bill you have the little statement slip, but they always ask you to write your account number on your check anyway, so that if the slip gets separated your payment can easily be credited. Do not send a check without an account number even if you include a note asking them to credit it to Julie Smith's account, because there could be dozens of Julie Smiths. Also, be sure to let your friend know that you have done this so that she can verify that the payment is properly credited.
If you don't want to go that route, yes, you can open an investment account for someone else, but again, you need some information from her. You'll need her legal name (not Julie Smith, but Julia A. Smith) and her social security number. I think it's a wonderful idea to help your friend in this way, and maybe you could make it an ongoing challenge/gift to her to keep her moving in the right direction. Open that investment account and make an initial investment in her name. Then to keep it ongoing, every time the two of you decide to get together and say go out to dinner. Instead of spending $30 on dinner, stop off together at the grocery store, spend $10 on items to cook at one of your homes, and take the other $20 and put it into that investment account.
Try to find a place where you can invest small amounts without paying high fees, or else you should open an interim savings account to put these smaller amounts until you have the required minimum and then transfer it to the investment. Not only are you helping her continue to invest, but you are also showing her that spending large amounts of money aren't absolutely necessary to have a wonderful time. Isn't the conversation over dinner and the time spent together more memorable and fun than that overpriced steak?
There are dozens of way you can show her that with little changes in attitude she can still have the quality of life that she wants, but without the debt! Take her to your favorite Goodwill store instead of to Nordstrom's.
Remember "if you give a man a fish you feed him for a day, if you teach him how to fish, you feed him forever". Teach her how to save on her own and before you know it she'll be out of debt and have a financially sound investment future!
Help is Appreciated
I also have a lot of credit card debt, and I've let it be known that a check made out to one of the credit card companies is fine! That way, the giver can make the check out in the amount that will fit their budget, and I can send it to whichever credit card has the next payment coming. The presentation can be a big part of the gift, though. I've gotten a check taped around a can of soup, stuck in a card, etc. Use your imagination, but do know that it's appreciated!
US Savings Bonds
Give her a savings bond. A $50 bond costs $25 and is usually worth the full amount if held 5 years. www.savingsbonds.gov.
Take the Next Step
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We're still paying off last Christmas and worry how we'll afford the holidays this year without charging it again! Tell us: Yes, we could use help getting out of the debt trap we're in! or No, debt is not a problem for us but I'm always looking for ways to trim my family's expenses further!
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