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A smart gift increases in value

If you’re looking for a slightly unusual gift for your children or your grandchildren, consider giving what Sylvester Kgatla, head of products at Absa Investments, calls “a DIY wealth-building kit” — the gift of unit trusts.

A unit trust fund falls into the “educational gift” category, Kgatla suggests, because it illustrates the miracle of compounding if you plough your gains back into the fund and watch your wealth grow. He says the gift is ideal because you can spend as little as R200 a month, through debit order, or commit a lump sum from your end-of-year bonus.

“An astutely managed unit trust with a strong exposure to the equity market will beat inflation over time and appreciate in value — something you can’t say for a quad bike, a car or a high-tech games console,” says Kgatla.

The idea is to get on top of financial worries now by nurturing regular saving. “These past two or three years, many families have had good reason to regret excessive consumption and the acquisition of useless toys,” he says. “Household debt versus income remains at the 80% mark and in the recent recession many South Africans swore off thoughtless consumer spending. Buying into a unit trust is a good way to turn the corner and recalibrate your personal priorities.”

There’s no reason why you can’t enjoy Christmas and commit to long-term wealth-building at the same time — maybe Jimmy or Lindiwe won’t realise the value of the gift now, but they’ll do so later. We vote that this is a “smart gift” for someone’s Christmas stocking — even if it’s just your own.

Read more news, blogs, tips and Q&As in our Smart Money section. Post questions on the site for independent and researched information

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