A grandmother once asked me what she could give her grandchildren who had everything already – toys, clothes, electronics, you name it… And this was one thoughtful grandma! She wasn’t looking for just any gift to wrap up. She wanted something memorable…something valuable. Sure, cash or gift cards were quick ways to get an easy win…but she was trying not to encourage flash-spending. She was thinking longer-term…. This grandma wanted to encourage her grandkids to plan for the future, and invest in stocks!
Oh, how smart this grandma was.
My answer to my new friend? Why not consider starting with stock in American companies?
Young or old, kids can enjoy following many companies, including those in the food, electronics and entertainment industries. They would recognize companies such as Disney, Nike, Wrigley’s, Pepsi, Coca Cola, Harley Davidson, McDonalds, Wendy’s, Kellogg’s, General Mills, Yum, Starbucks, Apple, Netflix, Under Armour, Microsoft and many others. So many others.
Investing a small amount of money in the stock market while grandkids are younger can pay big dividends, too. It’s possible a good investment (or several) might even pay for a college education. What a gift that would be!
While you might make the initial investment, you are also starting the learning process for sound investing habits in the kids you love so dearly.
How can you help your grandkids start investing in stocks?
You can buy stock a few ways:
- from a broker,
- directly from the company,
- by using an app or website designed for very small investors.
Of course, you can buy a basket of stocks in a mutual fund or an Exchange Traded Fund (ETF). But if what you want is getting kids interested and having a great tool for learning the basics, then individual stocks provide what a fund can’t.
If you have your own broker and account, you can ask the broker to start a Uniform Gift to Minors (UGTM) account for your grandchild, with you as the adult listed on the account. If your grandkid is earning income, you might start the account as a Roth IRA (Individual Retirement Account) so that it grows tax free. This is very advantageous.
What if you can’t invest much?
Don’t sweat it. In helping them invest in their future, you’re giving your grandkids a lot already.
But, you can also start a DRIP (Dividend Re-Investment Program – account directly with some publicly traded companies). A DRIP offers another way for your grandchildren to make contributions of their own too, sometimes as little as $10 or $20 a month. Look for information on companies that do DRIPs at www.dripinvestor.com which has a starter guide with helpful information. Because you are dealing with each company, you won’t have a central account. You will need to open a DRIP account with each company where you want to purchase stock.
What happens when you buy a stock?
When you buy a stock, you can often order an actual stock certificate – for a fee – to present to your grandchildren. Cool, right? Or, you leave the stock shares in the account, which means the stock shows up on monthly statements and is considered “held in street name” with the broker.
If you do opt to get a certificate, be sure to keep it in a safe place (it’s as good as cash).
How to pique kids’ interest in stocks?
You can learn which stocks might be good investments by researching them at your local library and reading about them in the news. Start a watch list, and track prices of those you like. Sample the company’s products (what kid wouldn’t want to sample food?) or do some comparisons with competitors. This is fun research! Plus, it’s good opportunity for memory-making.
Remember, there is risk with reward, and a great past performance does not guarantee a stock’s future results.
So….what stocks would you buy your grandkids?
If you want more ideas on saving and investing for kids, you’ll find free downloads at www.moneygodmother.com.