As I’ve been speaking to financial education experts over the past few weeks for Financial Literacy Month. It’s come up over and over again: how hands on experience with money is the best teacher.
When you also consider that one of the keys to successful investing is time – the longer you hold onto stocks, for example, the more time you have to build your investment and ride out the market ups and downs – you can see the benefits of getting your child in the markets as early as possible.
As for how to get your child started, without spending a fortune, consider the following:
1. Investment Accounts: You can open an investment account at TD Ameritrade online in a matter of minutes, for as little as $50. I bought my son shares of Vanguard’s Information Technology Exchange Traded Fund (ETF), which trades under the stock symbol VGY. This allows him to have little pieces of companies like Apple (AAPL), Microsoft (MSFT), and Facebook (FB).
When you go to the TD Ameritrade site, you’ll need to select the option that allows you to be the custodian of the account for a minor. They are called UTMAs (Uniform Transfer to Act), or UGMAs (Uniform Gift to Minor’s Account).
You’ll also need the minor’s social security number. Invest in something your child can relate to and encourage them to add allowances and financial presents to this account. Exchange traded funds (ETFs) in their area of interest and mutual funds are always a good bet, as they come with professional management. TD Ameritrade’s online chat and easily accessed customer service make the process easy.
2. SparkGift: If you want to give a one-time gift of stock or ETFs, SparkGift is a great option. The site lets you buy fractions of shares and funds in increments starting at $20. They provide recommendations for popular choices, and will send a certificate to the lucky recipient in minutes. SparkGift charges a fee of $2.95, plus 3%. The recipient doesn’t pay anything to redeem their shares or hold their investment.
3. Savings Bonds: While they don’t have the same potential for investment growth, a tried and true financial gift that is worth more than cash is the savings bond. Click here to go to the U.S. Treasury’s website, TreasuryDirect. As the site states, when you buy savings bonds as gifts, you must hold them in your TreasuryDirect account for at least five business days before you can deliver them to the gift recipient. You must be 18 or older to create a TreasuryDirect account and to buy gift bonds. A child under 18 can get gift deliveries in a Minor linked account, which is established within the TreasuryDirect account of the parent or guardian.