Teaching children about the stock market and investing can be an excellent way to prepare them for their financial future. Buying stocks for kids can introduce them to concepts like saving, investing, and the potential rewards and risks involved. It can also help them develop a long-term perspective on wealth building.
There are a few different ways to buy stocks for kids. One option is to open a custodial account in the child’s name. A custodial account is a type of brokerage account that is managed by an adult on behalf of a minor. The adult can make investment decisions on behalf of the child until the child reaches the age of majority (18 or 21, depending on the state). Another option is to buy stocks through a UTMA (Uniform Transfer to Minors Act) account. A UTMA account is similar to a custodial account, but the assets in the account are transferred to the child outright when they reach the age of majority.