Ask Kim
Buying Stock for Children
I'd like to give shares of stock to my kids. I can spend $50 per child and want them to be able to recognize the companies. Can you point me in the right direction?
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
January 26, 2006
I'd like to give shares of stock to my kids. I can spend $50 per child and want them to be able to recognize the companies. Can you point me in the right direction?
One of the most efficient ways to buy a small number of shares is to go straight to the company. Hundreds of firms sell shares directly to investors.
Unfortunately, most of them set minimum investments well above what you want to spend. Of the seven U.S. companies -- yes, seven -- that let you start with $50 or less, the only name that might ring a bell with children is Walgreen. And a drugstore chain wouldn’t register too high on a child's "wow" meter.
Invest more and the recognition factor increases exponentially. The initial minimum for a direct purchase of Domino’s Pizza or Dell is $250. Nike and Best Buy have $500 minimums. Disney, the kiddie gold standard, lets you in for an even grand. Typically, you'll have to pay small fees in addition to what you will pay for the shares.
An alternative approach is to open custodial accounts for each child at ShareBuilder. There are no minimums, and the commission for a one-time investment is just $4. You can even purchase partial shares. For example, with Disney recently trading at $26, your $50, less the $4 commission, would buy 1.8 shares.
To learn more about buying a single share, see A Kid-Friendly Introduction to Stocks.
