My daughter received $50 from her great-grandfather for Christmas and we all agreed that there was absolutely nothing left on her list that she really needed. I pitched the idea of buying a share or two of stock with the money so she could watch it grow over time. I think the idea of buying stock for children is a great way to introduce them to some basic investment concepts.
Besides, when I my kids age I thought the idea of owning stock was cool!
The Best Stocks for Children
The best stocks for children are not necessarily the best stocks for average investors. Kids need to know a little something about the company. It could be their favorite tennis shoe brand (maybe Nike), maker of their favorite gum (think Wrigley), or even the maker of their beloved XBox (Microsoft).
I offered up a short list of kid-friendly stocks that I thought would provide good growth and dividends over the long term; nothing too speculative for my daughter’s first pick. As I suspected, she settled on Disney, and we were off to open a ShareBuilder trading account.
How to Invest in Stocks for Children at ShareBuilder
We decided to open a custodial investing account with ShareBuilder for a couple reasons. The main thing I like about Sharebuilder is that you can buy partial shares, so by committing $50 for her first stock purchase, she should be able to buy around 1.4 shares of Disney stock (trading around $32). If trading with a more traditional broker you often are forced to only trade in full shares – meaning kid-friendly stocks like Google and Apple would be off the table considering their high per-share price.
I decided to keep this money out of the Educational Savings Account, and her 529 College Savings Plan, because it may not be used for educational purposes down the road. Who knows…maybe this will buy her a car in ten years (with a little help from Mom and Dad, and a few more contributions from her Papa).
I can’t wait to show her “DIS” in the stock report of the newspaper and begin explaining what happens when stocks go up and down, etc. My wife is convinced I am WAY more excited about buying stock for our children than the kids are! She’s right, because no one ever explained these investment concepts to me, and what a leg up I would have had to have someone “coach” me on such financial matters a young age.
Let’s just hope I don’t have to teach them about losing money. Actually, that’s a pretty good lesson, too, and a good reason to get the kids involved when buying stock for children. They certainly need to know their are risks associated with investing in stocks.