How to Buy Stocks & Bonds for Kids
Sometimes, you may wish you’d invested in the stock market earlier in life. You probably wonder how much you could’ve made if you invested when you were much younger, but now it is the time to do it for your children. Buying stocks for your children can allow them to own a little piece of a company and have their investment grow over time.
Buying a bond for a child teaches him how to save because he will have to wait a certain amount of years to cash in his bond, after it appreciates. Teaching your children how to invest now can benefit them later in life. Starting your children with a few stocks and bonds can teach them financial responsibility.
Buying Stocks for Kids
Choose companies for your kids that they will recognize, such as Coca-Cola or Disney. Getting them involved in the process will spark their interest in investing. Contact your stockbroker and discuss your options when purchasing the stocks; such as the amount of shares and the cost per share.
Purchase the amount of shares you want for your child. Name the portfolio after your child (full name or nickname). The account you will be opening for your child will be a “custodial account.” According to The Motley Fool, kids aren’t allowed to enter into any contract, so they’ll need their parent or guardian to open accounts at financial institutions.
Receive the stock certificate from your stockbroker and give a copy to your child. You can also frame the certificate and hang it in your child’s room or an area in the house so she will always see it and be proud of her investment.
Buying Bonds for Kids
Buy commission-free bonds from the government by visiting TreasuryDirect.gov. Buying an electronic bond means you can send the bond to the recipient quickly and easily. Open an account if you don’t have one already. Also visit a financial institution, such as a bank, to purchase a bond. You will fill out the purchase application and pay for the bond. You will receive the paper bond in the mail within three weeks. You can also instruct the financial institution to mail the bond directly to the recipient.
Purchase bonds for kids by using the “gift box” feature. You cannot have access to the “gift box” until you open an account with TreasuryDirect. Keep the bond in your account until you are ready to give it to the recipient. The child will have to have a TreasuryDirect account to receive the bond, so you will have to open an account for him using his full name and Social Security number.
Open a TreasuryDirect account for the child called a minor-linked account. TreasuryDirect.gov states that a minor-linked account is a custodial account that a parent or guardian opens for children under age 18. The child’s minor-linked account can receive bonds from other senders. Send the bond to the child’s minor-linked account. To send the bond successfully, provide the recipient’s full name, Social Security number, and her Treasury Direct “minor-linked account” number.