When my kids were born, I had the brilliant idea of investing their gift money into individual stocks and having stock certificates issued in their names*. I bought the shares in my brokerage account and requested the certificates from my broker.
I decided that this would be a good idea because:
1. Stock certificates are cool. Not only are they cool but they can be beautiful works of art. I find the idea of holding certificates romantic and old-fashioned. (Weird and dorky, I know).
2. Locked in savings. The kids will have a difficult time trying to sell them before they are adults so the money is locked up for a long time.
3. Dividend reinvestment plans (DRIPs). Many companies offer the opportunity to reinvest any dividends in additional shares helping the investment grow even more.
4. Periodic share purchases. Some companies will allow you to add small amounts to account from time to time to buy fractional shares. Generally you can make these purchases with very low or no fees. Some companies will also offer a discount off the market price.
5. Stock splits are exciting. The arrival of more stock certificates in the mail is cause for celebration.
~~~ See! Stock certificates can be fun. ~~~
Stock Certificate Considerations
If you are interested in buying stock certificates for your children, please keep the following in mind:
1. Some companies have stopped issuing paper certificates – which saddens me because I love the paper – but most of those same companies will allow you to hold them electronically with their transfer agent. The transfer agent is a third-party that manages and administers a company’s share registry and investment programs. Sometimes, through the transfer agent you can invest in a company directly, without the use of a brokerage firm. If there is a particular company you are interested in investing in, a quick Internet search will help you find the transfer agent and the details of what direct investment plans they offer. As an example, here is IBM’s program. (Not a recommendation – please do your own research).
2. If you purchase the shares through a brokerage, your broker may charge you fees to issue stock certificates. The fees vary but they can exceed the cost of the shares themselves! The stock will need to appreciate considerably for the transaction to be profitable. The brokerage may also require oodles of paperwork to issue shares to someone other than the account holder. They may also require more paperwork to issue shares to a minor.
3. Investing in stock involves risk, including the risk that the company may cease to operate and the share certificate will be worth zero, zilch, zip or only be valued as a collectible. (See photo at the top of this post – that certificate belongs to my son). Messy!*Tax laws and Securities regulations change and vary by jurisdiction. Please verify based on your own situation. Thanks for visiting. You can find this post at: