Buying Stock for a Baby: A Smart Way to Invest in Their Future
Have you ever wondered how to buy stock for a baby? Investing in the stock market can be a great way to build wealth over time, and it can also be a meaningful gift for a newborn or a young child. In this article, we will explain how to buy stock for a baby, what are the benefits and risks of doing so, and what are some of the best stocks to buy for kids.
How to Buy Stock for a Baby
Buying stock for a baby is not as complicated as it may sound. There are two main ways to do it: opening a custodial account or buying a stock gift card.
Opening a Custodial Account
A custodial account is a type of investment account that is managed by an adult on behalf of a minor. The adult can buy and sell stocks, bonds, mutual funds, and other securities in the account, but the ownership and control of the assets belong to the minor. The adult can only use the money in the account for the benefit of the minor, and cannot withdraw it for personal use. When the minor reaches the age of majority (usually 18 or 21, depending on the state), they can access the account and do whatever they want with the money.
To open a custodial account, you need to choose a brokerage firm that offers this service, such as Fidelity, Schwab, or TD Ameritrade. You will need to provide some personal information about yourself and the minor, such as name, address, social security number, and date of birth. You will also need to fund the account with an initial deposit, which can vary from $0 to $2,500 depending on the brokerage firm. Once the account is open, you can start buying stocks for your baby.
Buying a Stock Gift Card
A stock gift card is a simple and convenient way to buy stock for a baby without opening an account. A stock gift card is a physical or digital card that allows the recipient to redeem it for shares of a specific company. You can buy stock gift cards from online platforms such as Stockpile, Give A Share, or SparkGift. You can choose from hundreds of popular companies, such as Apple, Disney, Netflix, or Amazon. You can also customize the card with a message and a design.
To buy a stock gift card, you need to select the company and the amount of money you want to spend. The price of the card will include the cost of one share of the company plus a fee (usually around $5). You can pay with a credit card or PayPal. You can then send the card to the recipient via email or mail. The recipient can redeem the card online by creating an account with the platform and entering the code on the card. The platform will then buy one share of the company on behalf of the recipient and deposit it in their account.
Benefits and Risks of Buying Stock for a Baby
Buying stock for a baby can have several benefits and risks that you should consider before making a decision.
Long-term growth: Buying stock for a baby can be a smart way to invest in their future. By starting early, you can take advantage of compound interest and benefit from the long-term growth potential of the stock market. For example, if you invest $1,000 in an S&P 500 index fund when your baby is born and leave it untouched until they turn 18, it could grow to more than $7,000 assuming an average annual return of 10%.