By Jennifer Itzkowitz
The other day a student approached me after class to ask if I had a hot stock tip. As a finance professor, I hear this question all the time. I’ll confess that with the stress of exams upon us, I couldn’t avoid a little sarcasm in my standard response: “If I had a hot tip, do you think I would be here?”
The truth is, I do have a hot stock tip for the holiday season.
While we’ve all heard that owning a diversified portfolio of stocks has historically been one of the surest ways to build long-term personal wealth, what most people don’t understand is how starting early compounds the benefits.
So this year, my hot tip is to go one step further: Give the priceless gift of investing.
The proliferation of trading apps has made investing cheaper and easier than ever before. The average retail investor can buy fractional shares, which provides everyone with access to higher-priced, more popular, and higher-quality stocks, regardless of their level of wealth. Easy-to-use apps further reduce barriers to market entry by minimizing fees, eliminating account minimums, and allowing trading at the push of a button.
Still, too many Americans do not invest in the stock market. According to the latest Survey for Consumer Finances conducted by the Federal Reserve, only 58% of households own publicly traded stocks, directly or indirectly. And the percentage of younger investors is predictably far lower than that.
The biggest barriers to investing include a lack of confidence and financial education. In recent research, Anamaria Lusardi and Olivia Mitchell, experts in financial literacy and financial education, described financial literacy in the United States as “strikingly low.” In a field study, they asked three basic finance questions about interest rates, inflation, and stock risk, finding that only 43% of Americans could answer all three correctly.
But gaining confidence and learning about finance are skills that we all can (and should) learn. Recent research illustrates how small nudges—like receiving a stock gift—can have profound impacts on financial behavior. Economists Saumitra Jha and Moses Shayo showed that especially among those who were unsure of themselves at first, the simple act of trading stocks with no additional educational content improved financial knowledge, risk tolerance, and confidence. This created a reinforcing cycle of confidence and increased stock market participation—the ideal strategy for building long-term personal wealth.
Last year, I put this theory into practice and tried it out my own family. I gifted my 12-year-old daughter $100 on an app that allows kids to buy and trade stocks through custodial accounts. I encouraged her to buy fractional shares, allowing her to choose the stocks of four different companies that interested her. To her utter amazement, she watched her money grow! And rather than cashing out her earnings she re-invested them confidently.
My own academic research confirms my daughter’s experience. Observing people’s actual behavior on a stock-trading app, my co-authors and I show that stock gifts are a low-cost, impactful nudge that fosters long-term stock market participation. Even the small gift of a single stock leads to sustained stock market engagement, with 90% of recipients remaining invested a year later, underscoring the long-term effects of a simple, small action.
Giving my daughter a gift of stock didn’t just introduce her to investing, but also opened the door to discussing finance in a different way than we had before. It gave my husband and I the opportunity to teach her about household money management, which has helped her to budget, save, and (most enjoyably for her) spend.
I’ve seen firsthand how empowering someone you love with financial knowledge provides them with a critical tool to help navigate their own future. Too many Americans have the means to invest in the stock market, but aren’t putting their money to the best use.
So this holiday season, don’t let your loved ones get left behind – a gift of stocks fosters financial education, builds financial confidence, and jump-starts their process of achieving long-term financial success. Your simple gift is more than just a gesture; it’s an investment in a secure financial future.
Jennifer Itzkowitz is an Associate Professor of Finance at Seton Hall University and Adjunct Associate Professor of Finance at New York University.
