Skip the Hatchimals this Christmas. Consider buying your kids stocks this holiday season, and in the process introduce your children to the world of finances–and maybe even earn some money if you pick a good stock option.
You don’t have to be a stock market whiz to find a good stock for your children. “Kid-related investment ideas are everywhere. From breakfast to bedtime, children are exposed to products and services from publicly-traded companies. Who makes their favorite cereal, snack or special-occasions-only fast food? Which brands are behind their most beloved toy, gadget, sneaker or sweatshirt? Explain that owning a share of that company’s stock means they are not just customers — it makes them part owners of the business and comes with show-and-tell bragging rights,” reported USA Today.
You can also look for companies that coincide with your child’s particular field (such as technology or medicine) or a cause they cherish (the environment or social responsibility).
It’s a relatively easy process, USA Today explains. “One of the simplest ways to get children started with stocks (and to give them a true sense of ownership) is to set up a custodial brokerage account in their name and seed it with some starter stocks or shares transferred from your brokerage account. You’ll need their Social Security number and a grown-up to name as the custodian. Adult supervision is required to manage the account until the child reaches the age of majority (between 18 and 21, depending on the state).”
As the parent, you will have control over custodial accounts, which are offered by most major discount brokerage firms. Use a firm with $0 minimum balance requirement and one that offers reasonable commissions and no additional account management fees.
Stocks are a gift that keeps on giving. As your child grows, so will her interest in her portfolio, and she’ll start to get the hang of how to invest herself. “Don’t be surprised if you begin to bond over earnings reports, annual letters to shareholders and conducting on-the-ground research…Encourage your children to add their own money to their account (reinforcing the ‘pay yourself first’ habit) and offer to match the amount they choose to devote to investing,” reported USA Today.