How to Invest in Stocks for Kids

By Larry Parr

  • Overview

    Stocks can be a great investment for children and can start them on the road to future investing for themselves. One of the keys to capturing a child's interest in investing is to involve the child in choosing which investments to make. Companies a child is interested in, such as Disney, McDonald's, Coca Cola or the Gap can make stock investing seem more "real" to a child. Obtain one or more colorful stock certificates (Disney is a good choice for this) and hang them on the child's wall to make investing seem more tangible for young investors.
  • How to Invest in Stocks for Kids

    • Step 1

      Open a custodial account at a brokerage in your child's name. Fund the account.

    • Step 2

      Ask your child for a list of his favorite companies. A trip to the grocery store or the mall may help him begin thinking about companies such as General Mills (breakfast cereal), McDonald's or another favorite restaurant, the Gap or Old Navy, Coca-Cola or Pepsi ... the list is endless. Talk to your child about the ways companies make money and that owning stocks allows people to share in some of that money. Explain that stocks can go up as well as down in value.
    • Step 3

      Research some of the companies your child is interested in. Find a company with good prospects and buy 100 shares of stock in your child's name through your custodial account.
    • Step 4

      Show your child how to follow the stock's price either online or in the newspaper. Encourage your child to think of additional companies she might want to buy.
    • Step 5

      Contact the Investor Relations department of companies that your child is interested in and ask if they have a direct stock-purchase plan. You may be able to buy stock directly from a company without paying a broker's fee, and you may be able to buy single shares and get the actual stock certificate sent to your home for framing.
    • Skill: Easy
    • Tip: When you buy through a brokerage house, stocks are general purchased in what is known as a "street name." If you tell your broker that you wish to purchase one or more shares in your name or your child's name, then you can have the actual share certificate sent to your home for framing.
    • Tip: Buying stock directly from a company may mean that you will not need to open a custodial brokerage account at all. It is often easier to buy single shares of stock directly from a company than it is through a broker.
    • Warning:
    • Do your research and try to pick companies with good track records. If your child sees nothing but losses, his interest in stocks may wane.

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