How to Give Kids Stock Gifts – Best Stocks For Kids
Holiday shopping is quite stressful. You’ve got to brave the snow and ice, battle through hordes of other holiday shoppers, and hope and pray the items you want aren’t out of stock.
Doing all this for people who are easy to shop for is hard enough. But shopping for your kids, especially ones who seem to have ever changing interests, makes you want to give up.
They’ve already got mountains of toys, yet it seems like they only play with the same few toys no matter how many new ones you get them for the holidays. All those other toys are relegated to collecting dust in a toy box, while you have to sit there and think about the money you just wasted.
You’re probably sick of your kids getting all these toys for Christmas, whether from you or from relatives who don’t know any better.
What if you could give your kids a gift that will actually come in handy that isn’t just dollar bills?
Stock gifts could be the way to go. Gifting kids shares of stock for Christmas crosses out the stress that comes with guessing which gift to get for the kids, but that’s not all: you’re also giving the kids a financial head start, as well as a chance to learn some personal finance lessons.
So instead of wasting more money on toys that’ll never see the light of day, why not invest in your child’s future this holiday season with some stock? Here are some of the best ways to give stock gifts.
1.) Contributing to a 529 Account
The 529 account is one of the best ways to give your kids stock gifts. 529 funds are invested into various stocks and grow tax free, and they can be withdrawn tax free if spent on qualified educational expenses.
You may already have one open if you have children, so you’re already “gifting” them stock in a way. If you’re looking to further your giving, however, look to family and friends with children.
You already know that saving for your child’s college is tough, and your friends and family that have children are in the same boat. They’d appreciate any donation, even if it’s only $20.
Like other types of investment accounts, setting up a 529 plan can be confusing. Fortunately, a service called Collegebacker has their own 529 plans that are easy to open – they claim you can open one in 5 minutes or less.
Collegebacker also hands you $25 in matching funds when you open and contribute to the account.
2.) Dividend Reinvestment Plan (DRIP)
A Dividend Reinvestment Plan, or DRIP for short, is an investing plan that combines dividends with the power of compounding.
In a Dividend Reinvestment Plan, you buy shares of dividend-paying stock. When each stock pays out its respective dividend, the DRIP plan automatically reinvests those dividends back into their respective stocks. On top of that, you usually pay no commission and you get a slight price discount in a DRIP plan, a little incentive the company offers you for reinvesting.
So if you had $100 worth of stock from Company X and you were paid a dividend of 3% ($3), you’d have that dividend automatically be reinvested so that you’d own $103 of Stock X. Next time, assuming no stock price change, you’d reinvest $3.09 (3% of $103), and so on.
Some kid-friendly companies have fee-free dividend reinvestment plans for kids. In addition, many top brokers, like TD Ameritrade, offer free dividend reinvestment.
3.) Fractional Shares
If you don’t have the capabilities to be buying whole stocks or investing in DRIPs, consider giving fractions of actual shares to your kids.
What is a fractional share?
It’s exactly what it sounds like: a piece of a share. These are great for investors with less money but want to get in on a company with a high share price, like Tesla, who’s stock price is over $300 per share.
Fractional shares aren’t available as commonly as whole shares, but you have some excellent online options.
M1 Finance lets you buy fractional shares of nearly any investments. They offer tons of pre-built investment portfolios, but you can build your own if you’d like.
Your portfolios also automatically re-balance every time you invest more money into them, buying and selling shares to keep each portfolio holding at the weight you specify.
The best part about M1 Finance? No commissions, and barely any fees.
Stockpile is an easy platform on which you can gift your children stock. On Stockpile, you can open a custodial account for your children and buy fractional shares for as little as $0.99 per trade.
And in the spirit of giving, Stockpile gifts you $5 in free stock when you buy your first stock/ETF shares on the platform.
But here’s where it gets interesting: Stockpile sells stock gift cards for over 1,000 stocks and ETFs. Hand one of these to your kids this holiday season and build their wealth early.
Give the Gift of Knowledge This Holiday Season
When you give your kids stock gifts, you aren’t just making holiday shopping easier while giving them a wealth-building head start. This is a chance to teach them about finances.
One way to educate them is to teach them to evaluate the stock you gifted them. They can learn different investing terminology (like ticker symbols, market cap, and other investing terms), as well as the basics of investing, saving, and why you should be doing both.
In addition, you could make a little game of evaluating other stocks on something like Yahoo Finance.
You could then supplement this with books. In fact, a kid-friendly personal finance book would be a great second gift to accompany your stock gift.
By the time they’re 18, they’ll be a personal finance whiz.