Stocks as stocking stuffers: Three ideas for kids(Read article summary)
A weekly allowance isn't the only way to teach kids about personal finance. Here are three tips for giving stocks as Christmas gifts.
Parents have been trying to teach kids about money in clever ways for ages. Take the old standby: allowance. I remember doing chores around the house to earn my weekly allowance as a kid, and now that I’m an adult those early money lessons have come in handy.
But manual labor isn’t the only way to get your kids excited about personal finance. You could dress those money lessons up with a ribbon and bow – or put them in a stocking this Christmas.
Now that you’ve got the idea, let’s hash out the details…
1. Choosing stocks
When you’re an adult, any stock that performs well is exciting. Kids tend to care more about brands they recognize than return on investment – so when you pick investments for them, pick from companies that make or sell what they’re into. RankingTheBrands.com has a list of Kids’ "Top 100 Most Loved Brands" to give you some ideas. For example:
- Your kid loves video games? Nintendo (NTDOY) is a publicly traded company.
- A sports fan? Look into Nike (NKE).
- Love Disney movies? The Walt Disney Company’s stock (DIS) isn’t too pricey right now.
- Have an army of Barbies in your house? Think about Mattel (MAT).
- A fan of Happy Meals? McDonald’s (MCD) could be a good choice.
The bottom line: Whether it is food, a hobby, or a clothing brand, your kid will care a lot more if the company makes something they understand and can personally relate to.
2. Where to buy
If you’d like to start your kid off with a single share of stock, a few companies offer stock starter packages for kids. These companies don’t have every available stock, but they do offer framed certificates perfect for gift giving.
- One Share My First Stock: Comes with a framed, colorized stock certificate, an owner’s manual, and an e-book on trading.
- FrameaStock.com: Currently running Christmas specials with discounts on framed stock certificates and shipping.
If you’d like to order more than one share of stock, or don’t see the company you wanted listed, you can buy from an online brokerage. In "4 Ways to Invest Without Much Money," we listed a few good online brokerages:
3. Other options
Stocks aren’t the only learning gift you can stuff in a stocking this year. There are other ways to help your kid build a nest-egg. For example:
- Fund a small Roth IRA account. A Roth IRA account will earn compound interest your kids can use for college or in their retirement years. Use our Find an IRA tool to find an account with a low opening contribution requirement.
- Start a college savings account. It’s never too early to start saving for college. Open a 529 college savings account for your kid and help them understand how the different potential investments work and potentially compound.
- Buy bonds. When you invest in bonds, you loan money to a private company or government agency. The money you loan earns interest, and after the loan matures you get the money back. These investments may not have the excitement of stocks, but they tend to be safer and easier to understand. Read more about savings bonds offered by the U.S. government at TreasuryDirect.
If you do give the gift of stocks or bonds, set up a regular time to sit down with your kids and talk about their investments, including how they’re changing in value and why. The lessons they learn could stick with them for life, and maybe even change their life for the better.
While investments will never have the same cache as the toys advertised on TV, they can be exciting. For example, Stacy’s best-ever investment was Apple – a stock he bought for about $8 a share a little more than 10 years ago that now sells for more than $500. What kid wouldn’t be excited by that? And the best part: no batteries or assembly required.
Angela Colley is a writer for Money Talks News, a consumer/personal finance TV news feature that airs in about 80 cities as well as around the Web. This column first appeared in Money Talks News.