Fun stocks for kid

[gaja]

My nephew (11) didn't want any stuff for his birthday, so I want to buy him some stocks. This will just be for fun and learning, and risk/volatility is good. Max price $100.

He likes cars, mine craft and similar games, plays football (the type where you kick a ball with you feet), building stuff, and ships.

Any tips or suggestions?

[Missy B]

Are you planning to open an online brokerage account for the kid and buy him stock inside it?

[gaja]

I'm planning to just mentally earmark a portion of my account. That is what I've done with the other money I've saved for him (in a savings account).

[Stoic on FIRE]

I'd take whatever you are interested in in this case. Enthusiasm is infectious. That being said, based off his interests I'd say Microsoft (MSFT) due to Minecraft.

My grandfather did something similar to teach my brothers and I about investing at a young age. He set up a Uniform Gift to Minors Act (UGMA) account to do dividend reinvesting with McDonald's stock. Over the course of twenty years I learned quite a bit from him and also began seeing the effects of compounding interest though at a small level (the position was about $3000 when I finally liquidated the account.).

[Sydneystache]

Buy shares in Daimler, Tesla and BMW (I'd avoid American car companies unless he likes Ford or GM; avoid VW because of their emission issues), Lego, Manchester United or other football club (or their sponsors), entertainment companies (Disney etc), building and civil engineering construction companies, shipping companies. Wonder if you could buy shares in entire industries rather than individual ones.

You could always buy the Wall Street Journal or Financial Times, go to the share index page and explain to him the different companies that are listed and which industries they are in. Ask him to choose 10 companies he likes - if too difficult, use darts.

Best of fun!

[gaja]

After looking at different options, I wrote him a letter explaining his options (with graphs and everything):
1) bank account with 1.45% interest and no risk
2) index fund with ~5-6% interest and some risk
3) stocks with potentially higher upside and high risk. Examples were Orkla (Norwegian company similar to American Kraft foods), Disney and Ferrari.
4) get the money in cash and spend it

He called me, sincerely and very politely thanking me for the gift, saying he needed some time to think it through. My sister called me later that evening; he had read the entire thing out loud to his parents, and was apparently relishing the feeling of being a wealthy "adult". Earning high interest was very tempting, "but mum; I also have to consider the risk". #4 was not an option at all.

[Sydneystache]

Well done! You're giving him years of head start towards investing risk appetite.

[High Income Parent]

I recently opened a custodial Ira with my oldest and showed him how he owned a little bit of each company in an index fund. He enjoyed telling his brothers and sisters that he had an ownership in half the companies that made all the stuff in our house. :)
Maybe that's an option?

[daverobev]

I'd do something like http://www.giveashare.com/stocklistalpha.asp and then DRIP it, if you can.

Only thing I'm not sure of is taxation; depends on the country of course (in Canada, anything purchased by a Canadian resident for a minor is attributable back to the giver.. at least for dividends. Cap gains are taxed in the hands of the child. Super friendly).

*Edit* they seem really expensive actually. There are lots of DRIPs available with little to no fee on Computershare, and I'm sure there are other places in the US. In Canada, there are message board where people trade or sell individual certs for the end of day price + a courtesy fee of $10.

[LadyStache in Baja]

Good for you! Just wanted to share that my grandma did this for me! She controlled it from birth on. But every time I visited we'd look in the newspaper at the different stock prices and she taught me to care about share prices and what they mean. When I turned 18 she turned it over to me, and I spent a lot of time on etrade selling a share here or buying a share there. It was worth 10,000 by the time I was 22 (after having used it to pay off 8,000 of student loan debt). It helped finance my young adult life when I moved to Mexico and started a business. And it paid for my midwife.

Now I'm back in the accumulation phase, going all Vanguard. So grateful for her to showing me that risk is OK! One tiny thing she didn't show me, and I didn't figure out til now, is that I could have been investing a portion of every paycheck into my etrade account. So maybe when nephew gets his first job, you can teach him to set aside 15% or so. (And maybe 35% in a savings account for college expenses or something.)

[gaja]

Thanks for all the input! IRAs are not an option here, and I don't think we can do DRIP. I'm going to keep this in my name until he asks to get the payout, so I'm covering the taxes.

When nephew gets his first taxable income, BSU is a very good option. It is a savings account for buying a house, and the banks usually offer interest rates 3-4 points higher than normal savings accounts. In addition, you get a tax refund of 20 % of what you saved. It is only available up to age 34, and there are caps both to annual and total savings rates. So the earlier you start, the better.

[megfinancial]

Hi all! First post on here. I recently bought shares of stock for my goddaughter in gift card form from a company called Stockpile. Bought Colgate with a toothbrush to emphasize brushing her teeth, Lego stock with a bag of legos, and Disney stock with mouse ears. Made for a really cute gift!

[gaja]

Hi all! First post on here. I recently bought shares of stock for my goddaughter in gift card form from a company called Stockpile. Bought Colgate with a toothbrush to emphasize brushing her teeth, Lego stock with a bag of legos, and Disney stock with mouse ears. Made for a really cute gift!

I thought Lego Group was privately owned, and that you couldn't buy stock there?