Warren Buffett used to gift his family $10K every Christmas until he noticed they spent it fast — here are 4 better ways to use a holiday windfall

Warren Buffett is known for both his generosity and his frugality.

That might be why he pulled the plug on large cash gifts for his family after learning they blew through the money as quickly as they got it.

In a 2019 ThinkAdvisor interview, Buffett’s former daughter-in-law, Mary Buffett, recalled when the business tycoon gifted her $10,000 in hundred-dollar bills. She reminisced, “As soon as we got home, we’d spend it, whoo!”

However, as the king of investing — not spending — the Berkshire Hathaway CEO quickly decided a gift of shares would be a better investment for his family’s future than a windfall without any guardrails.

You may also have been lucky enough during previous holiday seasons to be gifted some cash, as Buffett’s family used to. Tempting as it may be to spend it, consider instead following these tips to put that money to use in a way that the Oracle of Omaha would certainly approve of.

1. Save

One of Buffett’s core principles is the power of compounding, where you can earn returns on both your initial investment and its accumulated growth. For example, had Mary invested her $10,000 and allowed it to grow at a 5% annual compounded rate for 10 years, it would have amounted to $16,288.95.

But finding the best possible rate isn’t always easy. If you’re willing to park your money for at least a year, you can get a rate of return over 10 times higher than a typical high-interest savings account with a guaranteed investment certificate (GIC). A GIC locks in your funds for a set period, providing stability and guaranteed returns the stock market can’t promise.

Sponsored

Smart investing starts here

Build your own investment portfolio with CIBC Investor’s Edge online and mobile trading platform. Enjoy low commissions on trades and special pricing for active traders, students and young investors.

Get started today

2. Invest

Beyond saving, another way to take advantage of compound returns is through investing.

Investing is higher risk than a savings account, but it can also lead to higher returns. That’s why when Buffett started gifting his family shares instead of cash, Mary Buffett wisely chose to retain her gifted shares in a diversified trust, rather than cashing them out.

But you don’t need to invest in private trusts to diversify your portfolio. Depending on your financial goals, there are numerous ways to diversify — investing in commodities and precious metals or exploring alternative investments such as private credit and private equity can help you add some variety to your portfolio.

3. Real estate

In 2012, Warren Buffett told CNBC that if there was a way to buy thousands of single-family homes at once, and to manage them easily, he would “load up.” He also emphasized he’d take out mortgages at “very, very low rates.”

Not everyone can purchase multiple properties, nor can they tap into low mortgage rates. After all, the average rate for a 30-year mortgage in Canada in September 2012 was 4.20% versus a 30-year fixed mortgage in 2025, which hovers around 5.09% (1).

However, there are ways to invest in real estate and avoid some of the downsides of the market. Real estate investment trusts (REITs) allow you to invest in commercial, industrial or residential properties without the hassle of physical property ownership. Alternatively, you could look to real estate ETFs, which hold a basket of REITs or real estate companies, and can also provide instant diversification.

Sponsored

Take control of your money with Monarch

Simplify your finances with Monarch, the all-in-one app designed to help you budget, track spending, and hit your goals faster. For a limited time, get 50% off your first year with code WISE50.

Start your free trial today

4. Plan for the future

Another reason Buffett’s not a big fan of cash gifts is that its value erodes over time. Buffett famously said, “If you don’t find a way to make money while you sleep, you will work until you die.”

Investing for retirement

To avoid having to supplement your income in retirement by working, it’s essential to set yourself up with the right investments and accounts. For example, a Tax-Free Savings Account (TFSA) can be a powerful investment tool: Contributions grow tax-free and your taxes won’t be affected when you withdraw.

If you combine a TFSA with a Registered Retirement Savings Plan (RRSP) alongside a diversified mix of stocks and bonds, you could maximize growth while protecting your savings from tax implications, and create some passive income in retirement.

Gold for retirement

Turn a cash windfall into a physical asset — like gold — to diversify your portfolio. Gold has historically acted as a hedge against inflation, and many find it to be a more secure place to invest their wealth.

One way Canadians can invest in gold that also provides significant tax advantages is through holding gold ETFs inside a TFSA or RRSP.

Planning for your future

Most of Buffett’s wealth will only be shared with his kids once he passes on. His ethos is you should “give your kids enough so they can do anything, but not so much that they’ll do nothing.” Whether or not you agree, you’ll want to ensure your own wishes are honoured.

Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Statistics Canada (1)