Do you want your child to learn the importance of money and understand the concept of stocks and related investments from the start so that he can avoid any future financial stress? Or you simply want to give them a share as a gift?
Well, whatever your reason is, buying stocks is definitely a good idea if you are ready to take risks. If you do proper research and hold the stock for more than 5 years, the risk factor is next to 0.
Can kids buy stocks?
No, a child cannot buy stocks by himself. One should be at least 18 years old to be able to invest in stocks by himself.
Can I buy stocks for my child?
Parents can buy stocks on the behalf of their children.
How to buy stock for a child?
So have you decided to teach your child some lifelong lessons? Well then here are some steps which you have to follow to buy a stock for your child:
#1. First of all, open an account for your child. You can either open a guardian Account, through which the real ownership is yours and another one is a custodial account, in which your child is the real owner but you can still have some control over it.
And once the child reaches the minimum age requirement he will gain full control over it.
#2. Online Broker: Then you can select an online broker (with no activity fees or any restriction on account balance and investment) Online broker can help you to surf through various stock options available in a company and also provide you are deep analytics about the company.
#3. Potential companies: Now, start searching for different companies you want to invest in. For example, if you want to buy stocks of big companies like Apple, Microsoft, etc, check the availability of the stocks. You can even buy Disney stock for children or tesla stock.
Also, research company annual performance.
#4. Start buying stocks: If everything else is sorted you can start buying stocks, you can buy a single share or even fractional and then increase over time.
Any stocks purchased under your child’s custodial account become your child’s property. Tax on the dividend is deducted at his tax rate and once he reaches the minimum age requirement, the custodial account becomes a regular account and he gains full control over it.
A Stock or equity is security which a stockholder holds and which represents his fraction of ownership over a company. This is a kind of certificate that allows a person to share the company’s assets and profits in terms of the stocks they hold.
Stocks in combination are known as shares. But what is the need for stocks?
Why do companies issue stocks?
A company issues stocks to get money from people for its various activities, such as:
– Paying off a debt
– To develop and launch a new product
– Expand their business
– Expand their production.
Why do people buy stocks?
While a shareholder buys stocks for:
– For long term monetary gains
– To invest their money
– To gain some control over a company.
Kinds of Stocks
Stocks can be categorized into two main categories: Common and Preferred stocks.
Common stocks give the owner his share on dividends and voting rights in a shareholder meeting.
Preferred stockholders don’t have voting rights but they receive their share of the dividend. Moreover, in case of bankruptcy, their payments are kept on priority than common stockholders.
Make sure you involve your child in the whole procedure. Buying stock for a child can help your child learn the importance of money. You can teach him about the importance of investing, stocks, and benefits which will help him in his future. He will surely grow into a responsible child.