When buying stocks for children, there are a few things you need to consider:
1. How much to invest: Most brokerage firms have a minimum investment to open an account of $500, and some have much, much higher minimums. If you are on good terms with a stockbroker, you could probably get away with much less.
2. Certificate or No Certificate: Brokerage firms charge a fee to issue a certificate. I’ve seen fees of $25 to $80 per certificate.
3. Framing the certificate: If you really want your kids to develop an interest in stocks, it may be helpful to frame the certificate [in a removable frame] for you child’s bedroom, especially if the certificate has an interesting appearance.
4. Holding title: Most investors use either Uniform Gifts to Minors Act [UGMA] accounts or Uniform Transfer to Minors Act [UTMA] accounts. UGMA’s allow the custodian to control the stock until the child reaches age 18. The UTMA account gives the custodian control generally until the age of 21, with the possible exception of California, which is somewhat unusual.
[Several years ago, when I looked into UTMA’s very closely, I read in several publications that California laws allowed a UTMA custodian to control the funds until age 25. I read the actual law but found it very confusing. I called six different banks and asked them what the maximum UTMA age was. Three told me 21 and three told me 25. I went with a bank that told me 25 of course, but I strongly recommend that you contact an attorney, whether or not you live in California, to determine which account is the best one to go with.]
5. Dividends: To Cash or Reinvest. I strongly recommend that if the company has a dividend reinvestment plan that you take advantage of it for your child.
Here are a group of companies that you might want to consider getting for your young ones, broken down into three categories: stocks for younger kids, stocks for teenagers, and stocks for kids with certain interests. Included is a description of the company’s stock certificate. However, don’t judge a stock by its certificate. [As an example, he old Planet Hollywood shares had a color picture of one of their restaurants but the company went bankrupt.] Keep in mind that some of these stocks with low market caps are extremely speculative. Do your homework before investing in these; you want the company to be around when your kid’s reach the age of 21.
Stocks for Young Kids
Build-A-Bear Workshop Inc. (BBW) colorful certificate with bear logo and buttons
Campbell Soup Co. (CPB) for kids who like their soup, the certificate features a Campbell Soup can
Walt Disney Co. (DIS) several Disney characters in color
DreamWorks Animation SKG Inc. (DWA) the top of Shrek’s head in color
Gymboree Corp. (GYMB) company title
Hasbro Inc. (HAS) Uncle Pennybags from the Monopoly game
Hershey Co. (HSY) Mr. Hershey
Jack in the Box Inc. (JBX) an early store, Jack, and a hamburger and French fries in color
Mattel Inc. (MAT) kids playing with Hot Wheels, Barbie, and other toys in color
McDonald's Corp. (MCD) hamburger, fires, and two workers
Tootsie Roll Industries Inc. (TR) woman between two globes
Topps Co. Inc. (TOPP) company logo
Wendy's International Inc. (WEN) company logo, two globes
William Wrigley Jr. Co. (WWY) what appears to be a South American native in headdress
Stocks for Teenagers
Apple Inc. (AAPL) black apple logo
Coca-Cola Co. (KO) reclining woman
eBay Inc. (EBAY) colorful logo
Marvel Entertainment Inc. (MVL) woman holding harp
Oakley Inc. (OO) woman with wings
Pepsico, Inc. (PEP) woman holding globe
Six Flags, Inc. (SIX) Statue of Liberty
Sony Corp. (SNE) woman surrounded by electrons
World Wrestling Entertainment Inc. (WWE) the big W logo
Orbital Sciences Corp. (ORB) For kids interested in outer space: view of the solar system in color
Quiksilver Inc. (ZQK) For kids interested in surfing or snowboarding: surfer and snowboarder
Steinway Musical Instruments Inc. (LVB) For kids who like playing the piano: company logo, and woman with harp
Author owns DIS, DWA, MAT, MCD, AAPL, KO, EBAY, and ORB.