Take a tip from the wealthy---rather than give your child a toy he will forget in several months, give your child an investment gift. Teach him the value of compound investing with the purchase of a dividend stock that reinvests, or show him how interest multiples with a CD or savings bond over time.
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Most kids adore Mickey Mouse and the Disney brand is known world wide. Give your child shares in Disney, and ask for one share to be sent to you. Disney shares are colourful as they contain a picture of the founder surrounded by his cartoon characters. This gives your child a tangible item to frame and display. Add to his shares as you review the prospectus and teach him about dividends and share price increase.
Certificate of Deposit
Open up a certificate of deposit (CD) for a kid at your local bank. A certificate of deposit is money deposited into the bank for a fixed amount of time that draws interest. This interest is added to your initial deposit when the money is withdrawn. An early withdrawal penalty may attach if the money is removed before the completion date agreed upon. You may also extend the date or reinvest the funds after the completion date.
Series EE Saving Bonds
Paper series EE saving bonds are bonds backed by the government and yield a fixed rate of return. Purchased at half price with a five year maturity, these bonds are available at most financial institutions. You can purchase paper bonds in several denominations from £32 up to £6,500, although there is a £3,250 limit per year. Although redeemable within the five-year maturity period, the penalty for early termination is the last three months of interest.
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