Advertisement
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.

Advertisement - Article continues below

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.

Advertisement
Advertisement - Article continues below

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.

Advertisement

Most Popular

2020 Stock Market Holidays and Bond Market Holidays
Markets

2020 Stock Market Holidays and Bond Market Holidays

Is the market open today? Take a look at which holidays the stock markets and bond markets take off in 2020.
July 1, 2020
What Are the Income Tax Brackets for 2020 vs. 2019?
tax brackets

What Are the Income Tax Brackets for 2020 vs. 2019?

The IRS unveiled the 2020 tax brackets, and it's never too early to start planning to minimize your future tax bill.
June 20, 2020
Searching for the Perfect Place to Retire
Empty Nesters

Searching for the Perfect Place to Retire

We home in on two places with less traffic and lower costs. 
July 2, 2020

Recommended

5 Booming Biotech Stocks to Buy
healthcare stocks

5 Booming Biotech Stocks to Buy

These five biotech stocks have already gone on heaters of 30% or more in 2020, and all of them still have plenty of upside to spare.
July 3, 2020
Closing Bell 7/2/20: Double Dose of Jobs Data Drives Stocks Higher
Markets

Closing Bell 7/2/20: Double Dose of Jobs Data Drives Stocks Higher

The Nasdaq closed the holiday-shortened week at all-time highs after Thursday's data dump showed progress on the American employment front.
July 2, 2020
3 Municipal Bond Funds for Rich, Tax-Friendly Yields
Investing for Income

3 Municipal Bond Funds for Rich, Tax-Friendly Yields

Municipal bond funds allow you to enjoy the benefits of tax-exempt income. By investing CEFs, you can sweeten the pot even further.
July 2, 2020
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.
July 2, 2020