stocks

How to Buy Stocks for Children

Custodial accounts offer a low-cost way to buy shares for your children or grandchildren.

I opened passbook savings accounts for my grandchildren at my bank last year. Not only do the accounts pay essentially no interest, but the bank recently started deducting service fees. In lieu of making a “gift” of fees to the bank, I’d like to buy stock for my grandchildren. How do I go about it?

Several brokerage firms offer custodial accounts with low minimums, no set-up or annual fees, and low or no commissions for buying and selling shares. For instance, TD Ameritrade has no fees or minimum investment and charges $9.99 for each online stock trade. Charles Schwab sets a minimum investment of $100 and charges $8.95 for online stock trades. Scottrade has a $500 minimum investment and charges $7 for online trades. Each brokerage also offers many exchange-traded funds and mutual funds that don’t charge commissions for buying and selling.

ING Direct’s Sharebuilder program has no minimums and charges $4 per trade if you sign up for the monthly automatic investment plan, which can be a good option if you want to make regular investments every few months. And if you are still interested in savings accounts for the kids, ING Direct also offers its Kids Savings Account, which carries no minimum, charges no fees and is paying 0.8% interest.

To open custodial accounts for your grandchildren, you’ll need their Social Security numbers (each grandchild will need a separate account). Money you contribute to a custodial account is considered an irrevocable gift to the minor and can’t be taken back. You’ll need to appoint a custodian for each child’s account, who will manage the assets until the child reaches the age of majority (age 18 or 21 in most states) and takes control of the money. The custodian may be grandparents, the child’s parents or another person who will manage the assets in the best interests of the minor, says Dara Luber, senior manager of investment products and retirement for TD Ameritrade. Even if the parents end up being the custodian, grandparents may still contribute money to the account.

For more information about financial gifts for children (or grandchildren), see Tax-Smart Ways to Help Your Kids.

Most Popular

Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer
Coronavirus and Your Money

Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer

The IRS has an online tool that lets you track the status of your second stimulus check.
January 18, 2021
Biden Calls for $1,400 Payments as Part of $1.9 Trillion Relief Package
Coronavirus and Your Money

Biden Calls for $1,400 Payments as Part of $1.9 Trillion Relief Package

Under Biden's plan for a third stimulus check, the $600 second-round stimulus checks would be increased to $2,000.
January 14, 2021
When Could We Get a Third Stimulus Check?
Coronavirus and Your Money

When Could We Get a Third Stimulus Check?

President-elect Joe Biden and others in Congress are pushing for a third-round of stimulus checks, but it might be a while before we get them.
January 18, 2021

Recommended

Bonds: 10 Things You Need to Know
Investing for Income

Bonds: 10 Things You Need to Know

Bonds can be more complex than stocks, but it's not hard to become a knowledgeable fixed-income investor.
July 22, 2020
Is the Stock Market Open on Inauguration Day 2021?
Markets

Is the Stock Market Open on Inauguration Day 2021?

The federal government will enjoy an off day on Inauguration Day, but the stock and bond markets alike will conduct business as usual.
January 19, 2021
Kiplinger's Weekly Earnings Calendar
stocks

Kiplinger's Weekly Earnings Calendar

Check out our earnings calendar for the upcoming week, as well as our previews of the more noteworthy reports.
January 17, 2021
Stock Market Today 1/15/21: New Stimulus Plan Fails to Stimulate Stocks
Stock Market Today

Stock Market Today 1/15/21: New Stimulus Plan Fails to Stimulate Stocks

Did Wall Street just "sell the news"? Stocks decline a day after Biden unveils $1.9 trillion "American Rescue Plan."
January 15, 2021