How to Teach Your Kid About the Stock Market

In November, I gave some picks for all of you on the best buys for teaching children about money.  Since I had already used the ideas I gave you, I had to come up with something different for my own Grandchildren.

In Grandma Rie’s Money Camp last summer, they decided to open a one day soda and snack shop. We talked about how companies sometimes sell stock, letting other people own a piece of the company in return for some money to use in the company. They each printed a faked up stock certificate for their own soda and snack shop.

Since my oldest grandchild is now 8, I thought he was big enough to start taking more interest in investing in general and the market in particular. I decided to buy him one share of a stock in a company with a product in which he is currently interested. I talked it over with my son, the parent, and we decided that an actual certificate would be more ‘real’ to an 8 year old than an account at a brokerage somewhere.

My goal with this purchase was to show my grandson that real companies that he cares about DO have stock certificates and that HE can own shares. My secondary goal is to use that certificate as a further teaching aid throughout the next few years, by reminding him of the stock market, showing him how the share price changes, and letting him start to receive the mailings from the company.

So, I investigated how to buy a share of stock and get it in certificate form.

My Merrill Lynch broker wanted a commission of $50 plus the share cost and wasn’t sure that she could get it in certificate form.

Vanguard folks thought I might be able to go directly to a transfer agent handling the shares of the company in which I was interested. Since my grandson he has a DSI that he loves, loves, loves, my first thought was to buy Nintendo. However, Nintendo is based in Japan and I wanted to stay with US companies. I then settled on Hasbro, because he also loves these toys called BeyBlades and BeyWheels.

Vanguard was very helpful in identifying the transfer agent responsible for Hasbro. I called the transfer agency after reviewing their website. They wouldn’t sell one share of stock, the minimum was 500 shares!

After looking around online, I found a couple of sites that make a business of selling certificated shares – very expensively – but with nice frames and engraving. With the share price, the certificate registration fee, the framing and shipping I paid more than twice the market price of the stock. The minor recipient must have an adult custodian to ‘own’ the stock. You can easily find these by searching the internet with the phrase ‘one share’.

If it works well as a teaching device, I may go that route again for my younger granddaughter. otherwise, I will take another path.  However, I will start the process much, much earlier in the year.  It took a full 8 weeks from the time I ordered the framed certificate online until I received it – the day after we left to go to my grandchildren’s house for Christmas!

You can establish a custodial account for your child or grandchild, according to the laws of your area and then buy Shares through your broker or an online brokerage firm. You could even peel off some shares you already own and have them transferred into the minor child’s account. If you use online brokers, you will need to carefully review their products, sites and etc to make sure that using them allows you to conform to the laws in your own area as well as the laws in the country where the online broker site is located.

As time goes by, I hope that both my grandchildren will learn the benefits and drawbacks of investing in the market and I intend to try to help teach them. Directly owning stock should give them a bigger awareness of the existence and function of stocks and the stock market.