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The Gift of Investing in Your Children

The Gift of Investing in Your Children

Here’s a step-by-step guide to giving kids something with a lifetime of benefits: the gift of investing.

Making kids happy is an expensive prospect these days. $125 Lego kits, $500 gaming consoles, and $1,000 smartphones are just a few “basics” kids seem to require. But there’s a much more profound gift you can give that will lead not to clutter and eventual lack of interest: a share of stock.

According to a recent Federal Reserve bulletin, households that scored higher on investment knowledge were more likely to have a checking account, an emergency fund, and 401k—crucial savings vehicles that help build wealth and financial security.

Unfortunately, 4 out of 5 youth in the U.S. failed a basic financial literacy test. This lack of financial literacy is linked to debt, late payments, and defaulting on things like student loans. All of these outcomes can create stress, damage credit, and defer wealth building.

Why Give Stock to Kids?

There are several reasons why stocks make a smart gift for children.

  1. You don’t have to take time shopping or worry about buying something that doesn’t fit.
  2. They won’t end up in a landfill or garage sale.
  3. The recipient will remember and appreciate the giver for years to come
  4. Unlike toys, electronics, and clothes, stocks hold their value and can even grow exponentially.

How to Give a Stock as a Gift

If we’re honest, opening a stock certificate isn’t as exciting as getting the hot new toy or video game. Few kids’ faces light up at the prospect of dividends or shareholder meetings. However, when done right, a stock is an easy, educational, and super beneficial gift. Here’s what you need to know to nail it.

  • Choose a stock that’s meaningful to the child. If they’re a sports nut, a share of Nike or their favorite team will spark interest. For little children, companies like Build a Bear or Disney are relatable and fun. Find something they believe in and have a passion for, and they are more likely to form a personal connection to the investment and to care about and follow their stock as it grows.
  • Choose a service tailored to gifting stocks. There are lots of companies out there now making it easier than ever to give investments as a gift. GiveAShare lets you choose and purchase one share from a variety of companies, and their helpful guide lets you choose by industry, price, occasion, and recipient. Each stock comes with a printed certificate to help make the gift tangible for kids. Unique Stock Gift is a similar service that even lets you shop frames for the certificate.
  • Share your success stories. Let them know why investing is important to you, and how it has benefited you.
  • Cover the basics in ways that are real to them. Explain how dividends and compound interest work; show them with their own stock how it might grow at certain rates over the years. Play out scenarios, and predict what their stock could be worth when they are in high school, college, married, etc. Daydream about what they could use this money for—purchasing a car, paying for college, a trip around the world? Let them enjoy using their imagination, and help empower them with the knowledge that their dreams can become a reality.

At Citizens Bank, we believe that financial literacy is a key to building wealth and peace of mind. Click here to get started with a savings account or to find a location near you.

  • Disputes
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  • With a Roth IRA, you typically pay taxes on the money before you contribute to your IRA. This means you generally can make qualifying withdraws once you reach 59 1/2 years of age without paying additional taxes on the distributions.
  • A traditional IRA allows you to direct pre-tax income toward investments that can grow tax-deferred until your retirement. You cannot contribute after age 70 ½ and distribution is required at that age.

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