How to Give Stocks as Gifts

Like most parents, trying to get the perfect gift for an older child can be a challenge, especially when they've outgrown Barbie's but aren't quite ready for make-up! If this is the case, give some thought to putting your child on the road to a college education or a firm financial foundation with a gift of stocks, mutual funds or a 529 college saving program.

Instructions

1. Give 529's as a long-term gift for kids saving for a higher education. A 529 is a qualified state tuition program under Section 529 of the internal revenue code that is established and maintained by a state agency. Under these plans a person may either pre-purchase college tuition credits or set aside funds in a savings account for a beneficiary.

2. Consider gifts of mutual funds for kids. A mutual fund is an open-ended investment company that invests the money of its shareholders in a diversified group of securities of other corporations. Allowing children to invest in several companies they can see grow over time teaches kids the value of putting their money into something of quality. There is a monthly administration fee is which varies depending on the fund.

3. Get kids on board with their own money after the gift is given. Teach your kids about dollar cost averaging by adding allowance and other gifts over time. Offer to match, dollar for dollar, every contribution that a child is willing to make out of her own allowance or extra money.

4. Do not give bonds as gifts due to the interest rates and the length of time they must be held.

Tips & Warnings

• Giving stocks as gifts is about teaching children the value of discipline and to have a process of saving. The act of being disciplined is a learned characteristic. Any gift is great, but if the idea is to foster responsibility down the road, having them work and contribute after the initial gift is a great idea.