If you're thinking of a holiday gift for a child or simply an investment into his or her future, a worthy alternative to the latest video game or mobile-phone accessory is an investment in stock. Not only does this purchase introduce children to the fluctuating world of finance, it also is an asset for a young person's future. And whether it's just one share or many, buying stock has become much more accessible than in years past.
- Skill level:
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Decide how much money you want to spend. This is a crucial first step, because if you buy directly from companies, according to Kiplinger.com, they might have purchase minimums. Also, if you buy through a broker such as ShareBuilder or E*Trade, you'll have to account for fees and/or commissions.
Research the company or companies from which you want to buy stock. You might be buying a particular stock based solely on the child's interest in what the company offers, but if you are purchasing stock as an investment only, check out the company's financial stability and stock history.
Choose to buy from a company itself, from an online broker or from OneShare.com, which offers a stock certificate for a single share from major companies complete with a frame.
Do your research if you choose an online broker. There are plenty to choose from, and most all of them have varying fees/commissions.
Finally, fill in all information required from the broker or company. This usually includes address, phone number, date of birth and Social Security Number. If you are registering the information in your name, dividends will be taxed at your given rate. Registering the information in the child's name will also allow for any dividends to be taxed, but at a minor rate for people under age 18, according to BuyandHold.com.
Tips and warnings
- Read any fine print. Make sure you know what you're buying, as well as what you might have to pay in fees or commissions. Remember that dividends on any stock account are taxable.
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