Teach kids about the value of investing money rather than spending it. Not much money is needed to start buying stocks or fractions of stocks for kids. Start when the child is born or when she is old enough to recognize certain brands and companies. Choose company stocks which are in line with your family values as well as the child’s interests.
Step 1
Discuss different company names and brands with a child to find out which stocks may interest them. Some publicly-traded companies are recognizable to children. Introduce the concept of utility stocks as well, similar to the utility spaces on a Monopoly game board. Utility stocks tend to offer higher than average dividends, which are ideal for young investors.
Step 2
Decide on which type of account you would like to open for the child. Investment companies offer custodial and guardian accounts, which an adult can set up on behalf of a child. With a custodial account the child owns the money, the money is taxed at the child’s rate and you are in control of it. You retain ownership with a guardian account and the money is taxed at your rate. Another type of investment account for a child is an education savings account (ESA), a trust to be used for educational expenses.
Step 3
Invest in stocks for kids by opening an account and investing a set amount of money into the desired stock using ING’s Sharebuilder. By purchasing $50 worth of a stock (minus the purchase price), the child will have either a partial stock or a couple of stocks in that company.
Step 4
Purchase stock directly from public companies which allow direct stock purchases, or Direct Purchase Plans (DPPS). Each company will have its own minimum investment amount and fees. Also consider companies which offer dividend-reinvestment plans, or DRIPs.
Step 5
Open and investment account with a set amount at a bank or brokerage offering stocks. Call or visit business in your area to find out the minimum investment amounts and the products they offer which are in line with your investment plan for children.
Step 6
Sit down with the child to check on the investment’s progress each week or month. This will help the child interested in the investment and teach them about how a small investment can grow over time.
Warnings
- Do not purchase more than you can afford when one company has a minimum investment that is too high; simply find another investment company.
