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DRIPs and Investment Accounts for Kids

Updated on April 23, 2017
Deborah-Diane profile image

Deborah is a published writer, mother and grandmother who writes on diverse topics, including financial info, homemaking, gifts and more.

From Coins to Dollars - Even Kids Can Create Wealth!

Once your kids understand that they can use money to make even more money, they will be hooked!
Once your kids understand that they can use money to make even more money, they will be hooked! | Source

Teach Your Children How to Invest in the Stock Market

Have you ever thought about teaching your children how to invest in the stock market? From the time most kids are very young, they love to count their money. Once they own their first piggy bank, some children can spend hours stacking up all the pennies, nickels, dimes and quarters in their bank, and counting how many they have. After they reach school age, and they know how to count money in larger amounts, often children will begin to keep a running total of how much they have.

You may not be aware of it, but these children have already developed a very important milestone in their maturity. They have learned the value of deferred gratification. Rather than rushing to spend every dime they accumulate, they would rather watch their money grow. These children are ideal candidates for learning how to invest money in the stock market .... with mom and dad's help, of course!

If you begin slowly, allowing them to save or invest some of their money while keeping the rest of their cash at home where they can see it, your children will love having money in more than one form and location!

You can encourage them even more by adding a little extra money to help them start their stock accounts. My husband and I purchased 10 shares of Disney stock for each of our grandchildren at a time when we could purchase it for about $17 a share. It was their Christmas present one year. All of our grandchildren, except one, still have the investment and those ten shares have grown substantially over the past ten years.

Your Kids Will Love to Know They Can Make Money From Their Money!

Growing Money: A Complete Investing Guide for Kids
Growing Money: A Complete Investing Guide for Kids

Studies show that children who learned to save their money and defer gratification are happier and more financially secure as adults. This is a skill that parents can teach their children. This is a book that both parents and children will find helpful.

Along with their shares of Disney stock which we bought them, we gave this book to our older grandkids so they would understand what it meant to own stock.

 

Find Savings Plans for Kids

The first step you will want to take in teaching financial literacy to your children is to open a savings account. Add a little money to what they already have. Do you have relatives who give your children money on their birthdays or other holidays? Put that money in the savings account, too.

In the United States, you will want to open the account under the Uniform Gifts to Minors Act. This is a joint account held by both a parent and a child. The child gets full control of the money once they turn 18, and the parent has control of it until then. Many banks and credit unions also have special accounts for children which are intended to encourage children to save their money in the bank. Frequently, these accounts have either no fees, or very few fees. In order to encourage savings in young children, banks, credit unions and similar financial institutions will sometime even give a small gift to a child who opens an account. Two of our grandkids received cute little duffel bags full of school supplies when they opened their accounts. In addition, your children will earn interest on their money. In this way, you will have the opportunity to explain the benefits of compound interest to your children, and they will have fun watching their money grow.

Whenever your child gets a bank statement, show it to him, and discuss how they might use the money in the future. While the idea of saving for college or a house may not interest some children, the idea of saving towards their first car could motivate them to keep the money in the account until they reach their teens.

Teens Will Love Knowing That They Can Build Money for Their Future

The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of
The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of

This book is geared specifically for teenagers. Once they have their first job, they have the ability to see how they can start building a fortune for the future.

We have purchased this book for our older grandchildren, usually when they were getting their first job, so they could see how they would benefit by holding on to their investments, rather than cashing them in while they are young.

 

Open an Investment Account for Children

In addition to savings accounts, another program which is available under the Uniform Gifts to Minors Act is an investment account. Your children will love the idea of owning stock, especially if you help them invest in a company which interests them. Many major corporations that cater to children, such as Disney and McDonalds, have special investment programs for kids. For example, when children own at least 10 shares of Disney stocks, the company will send out special mailings to the kids, including their own annual report.

Your children will feel very mature and grown-up when they own their own stocks, and it will change their attitude about doing business with those companies. They will begin to understand the benefit of visiting a busy McDonalds or seeing long lines at Disneyland, if they understand they actually earn money when those companies are successful!

Easy Activities to Help Your Kids Grow Their Money

The Young Investor: Projects and Activities for Making Your Money Grow
The Young Investor: Projects and Activities for Making Your Money Grow

The more you educate your children about investing and financial information, the better off they will be as adults. These are projects that parents and children can work on together! Our younger grandchildren learned a lot from this book.

 

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Look for Stock DRIP Accounts for Kids

Once your children own stock in a company, one way the value of the investment can grow is through a Dividend Reinvestment Plan. A DRIP, as these plans are called, allows the company dividends to be used to purchase more shares of the stock, without having to pay commissions. Over time, this means that the number of shares your child owns will increase.

Gradually, you child will learn that they can earn money several different ways when they invest. They can earn when their dividends are reinvested. They can earn when stock values go up. And, they can build up their accounts even more as they invest more money over the years. Before your know it, your child will be an enthusiastic investor!

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    • stars439 profile image

      stars439 5 years ago from Louisiana, The Magnolia and Pelican State.

      A very important hub, and it is wonderful if children can have money saved for their future security. Great hub. God Bless youprecious heart.

    • souleru profile image

      souleru 5 years ago

      great ideas! It's amazing how much we don't teach children when it comes to finance

    • profile image

      MZHF 5 years ago

      Really good one, Ones they become adults they will find it very useful

    • Phil Plasma profile image

      Phil Plasma 5 years ago from Montreal, Quebec

      We don't have an equivalent program here in Canada, however, I plan on making use of:

      http://www.thedividendguyblog.com/

      From here I'll get links to great dividend paying companies and start contributing on my kids' behalf to a few of them. Once they start earning some money that doesn't come from their parents, do a bit of matching to help them get started, and then help them to do it themselves. Hopefully they'll learn the discipline to keep going with it.

      Great hub earning you a vote-up and a useful.

    • Au fait profile image

      C E Clark 4 years ago from North Texas

      Great information for people who want to get their kids started investing but don't know where to start. The younger a person is when they begin investing the more they will have when that day we never think will come does in fact arrive -- retirement.

    • Deborah-Diane profile image
      Author

      Deborah-Diane 4 years ago from Orange County, California

      Helping kids learn about stocks can make them life-long investors. We bought Disney stock for all our grandkids and that stock has gone up significantly in value over the years. Our grandkids love it!

    • moonlake profile image

      moonlake 4 years ago from America

      Useful and interesting hub. I never thought about stocks when our kids were growing up but a good idea. Voted up.

    • Deborah-Diane profile image
      Author

      Deborah-Diane 4 years ago from Orange County, California

      We are so glad that we have gotten our grandchildren interested in the stock market. Many young people do not realize how much stocks influence their lives, so we love educating them about this way to build assets.

    • Au fait profile image

      C E Clark 3 years ago from North Texas

      I really think people who understand investment have an advantage over people who don't. I think it's never too early for children to learn how to manage their money. Voted up and useful. Came back to pin this to my 'Financial Issues' board. Will also share with my followers.

    • Deborah-Diane profile image
      Author

      Deborah-Diane 3 years ago from Orange County, California

      I agree that teaching our children about investments is very important if we want them to be capable, self-supporting adults. It is never too early for kids to learn how to handle money. Thanks for sharing this information with others!

    • Au fait profile image

      C E Clark 3 years ago from North Texas

      Sharing this again for people who want to get started investing in their children's future and teach the children about investing at the same time.

    • Au fait profile image

      C E Clark 3 years ago from North Texas

      Sharing this again because everyone needs to know about the stock market and learn how to invest and save.

    • Au fait profile image

      C E Clark 3 years ago from North Texas

      An excellent article for learning about the stock market, and I think an investment account might make a good Christmas gift for a child or grandchild. Pinned to 'Awesome Hubpages,' and will share.

    • Au fait profile image

      C E Clark 3 years ago from North Texas

      This seems like a something good to start the New Year with. Investing in a child's future and teaching them how to do that at the same time. Voted up and sharing.

      Hope you and your family have had a great start on the New Year!

    • Au fait profile image

      C E Clark 3 years ago from North Texas

      Never too early to get financial security underway. Giving this another share for people interested in learning about investing and in teaching their children about it.

    • sujaya venkatesh profile image

      sujaya venkatesh 3 years ago

      tips for toddling tiny tots deb

    • Deborah-Diane profile image
      Author

      Deborah-Diane 2 years ago from Orange County, California

      Kids love the idea that they can make money from their money ... and parents will be glad they taught their children about this.

    • ezzly profile image

      ezzly 2 years ago

      Very clever hub, great for parents ! Sharing on twitter and voted up

    • Deborah-Diane profile image
      Author

      Deborah-Diane 2 years ago from Orange County, California

      The sooner you get your children interested in investing, the more likely they are to invest and save for retirement when they get older.

    • Deborah-Diane profile image
      Author

      Deborah-Diane 24 months ago from Orange County, California

      ezzly, thanks for sharing this. I have found it really exciting to see my children and grandchildren become interested in investing.

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