Stocks as Gifts
Many grandparents want to give gifts to grandchildren, and, of course, parents may have already given all the toys and gadgets they need. Grandparents also want to help with saving for college education. Giving shares of stock is a great way to do that. Put stock in the stockings (stock certificates). What you’re doing is not only helping them save for that education. You’re also offering them an education by teaching them about investments and financial markets. It’s a great tool.
I think you should match the stock to the child. If you have a little girl who just loves Disney and Disney princesses, maybe she needs shares of Disney. If you have a teenager who loves music and has an iPod, give him some Apple stock. If you have another one who drinks lots of Coca-Cola, how about Coca-Cola stock? Make it a product that they know, they use. They know the company and can connect that company and its earnings to the increase in their share price.
To get the children excited about getting the stock, let them choose. Start talking to them about that. Let them choose a company. Help them research that company.
You’re going to have to have some way of actually purchasing the shares, and there are various ways you can do this. Let me also mention that you might want to point them towards dividend paying stocks. Then you can set them up in a DRIP (Dividend Reinvestment Program), and every time there’s a dividend, they buy more shares. It’s a great way to build a position in a stock.
You can open an account for a child, but an adult has to sign on the account. That’s what a custodial account is. You can open that at a brokerage house and purchase shares within that account. There are also other ways. You can go to www.giveashare.com. If you use that method, they will actually do the certificate for you, so you’ll have a wonderful Disney certificate with Mickey Mouse on it; but you’re going to pay for that (usually about $39 a share). That can really eat into things. But if you go with a custodial account, you can buy the shares, leave them in the account, get on your computer and create your own certificate that you can wrap up and put under the tree for them.
With grandparents giving the stock, you can help them choose the company and then show them that statement on a regular basis. Then, they can see how those shares are growing, how the value of the account is increasing. They can see the dividends coming in and buying more shares. You can talk about adding different companies along the way and even allow them to participate in making the trades.