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

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
9 Great Growth ETFs for 2022 and Beyond
ETFs

9 Great Growth ETFs for 2022 and Beyond

These growth ETFs offer exposure to higher-risk, higher-reward stocks while lessening the risk of a single stock torpedoing your returns.
January 18, 2022
The 10 Best Closed-End Funds (CEFs) for 2022
CEFs

The 10 Best Closed-End Funds (CEFs) for 2022

These high-yielding CEFs won't just significantly boost your portfolio income. They'll also allow you to buy their underlying stocks and bonds at a di…
January 12, 2022

Recommended

Stock Market Today (1/27/22): Small Caps Slump Into Bear Market
Stock Market Today

Stock Market Today (1/27/22): Small Caps Slump Into Bear Market

The major indexes plunged from green to red Thursday, but small caps took the worst of it, with the Russell 2000 now more than 20% below its November …
January 27, 2022
Stock Market Today (1/26/22): Powell Rate Comments Rupture Morning Rally
Stock Market Today

Stock Market Today (1/26/22): Powell Rate Comments Rupture Morning Rally

The market didn't flinch at the Fed's nod toward a March rate hike, but stocks swooned after Chair Powell said there's "quite a bit of room to raise i…
January 26, 2022
Semiconductor Stocks: A Smart Bet for the Long Haul
Becoming an Investor

Semiconductor Stocks: A Smart Bet for the Long Haul

Stocks in this growing industry will stay in demand long after supply-chain snarls are unraveled.
January 26, 2022
Stock Market Today (1/25/22): Stocks End Down on Another Roller-Coaster Day
Stock Market Today

Stock Market Today (1/25/22): Stocks End Down on Another Roller-Coaster Day

The major indexes stage another comeback Tuesday but this time can't escape declines; Microsoft falls after hours despite an earnings beat.
January 25, 2022