Top Stocks for Kids: Building a Bright Financial Future

Diving into stocks for kids might sound trickier than teaching them to ride a bike- there are bound to be a few wobbles along the way!

But just like those first pedal pushes, getting your child started on their investing journey can be incredibly rewarding with the best investments for kids.

It’s not just about stashing away cash for the future; it’s about sparking an early interest in how money can grow and spending time giving them a giant leap ahead financially.

And hey, who knows? You might just be nurturing the next big financial guru in your household.

So, let’s talk about how you can invest money for your kids’ futures and grow wealth before they even know what money is!

Key Takeaways

Investing money for your kids now gives them the perks of long-term growth from multiple investment options.
Getting your kids started with a custodial brokerage account like the 529 Savings Plan or UGMA/UTMA accounts lays the groundwork for a solid financial future.
Sprinkle a little variety into their investment portfolio with a mix of ETFs, index funds, mutual funds, and more, steering clear of the risky business of penny stocks and crypto.
Make a start investing a blast for the young ones by picking stocks from fun, familiar names like Nintendo, Mattel, Disney, Netflix, and Nike, turning the learning process into an adventure.

Popular Stocks For Kids

Now, let’s talk about making investing fun and relatable for kids.

One way to do this is by investing in popular brands that they know and love.

Many brands offer stocks that you can invest in using Robinhood and other accounts, and here are some your kids might be interested in:

Nintendo

Nintendo really shines in the gaming industry, not just for its awesome games but also as a cool investment idea.

It’s a company avid gamers of all ages love, which makes it an intriguing investment opportunity.

For a parent or grandparent looking to give a meaningful gift to a Nintendo-loving kid, investing in Nintendo on their behalf could be a thoughtful and impactful choice.

Mattel

Mattel is the folks behind some of the most iconic toys ever!

Barbie, Hot Wheels, and a bunch of others that probably filled your childhood with joy and maybe a bit of chaos if you ever stepped on one barefoot.

When it comes to investing, Mattel can be a cool choice.

You could say something like, “Hey, you love playing with Barbie, right? Well, guess what? We own a tiny piece of the company that makes her!”

Disney

What better place to teach your kids to invest than with Disney? I mean, who doesn’t love Disney, right? It’s like the ultimate childhood dreamland.

You open up a custodial account in your child’s name, and you decide to sprinkle some Disney magic into your kid’s investment portfolio.

Not only are you giving them a piece of the happiest place on earth, but you’re also teaching them valuable lessons about saving and investing.

Netflix

Netflix is that awesome streaming service where you can binge-watch your favorite shows and movies to your heart’s content.

Why is Netflix such a neat investment for the little ones? It’s like the ultimate source of entertainment, with a treasure trove of shows and movies for kids and grown-ups alike.

Plus, they’re always coming up with cool new stuff, from animated adventures to gripping dramas.

Nike

Investing in Nike can be like scoring a goal in your kid’s custodial account.

Your little one is all about sports, right? Whether they’re dribbling a basketball or kicking a soccer ball, they’ve got that competitive spirit.

It’s like being part of the team, but instead of scoring goals, you’re scoring potential returns on investment.

Investment Accounts For Kids

Do you think the stock market is just a “grown-up” thing?

Well, guess what? Kids can totally get in on the action, too, and it’s never too early to start setting aside money for their livelihood.

Think what would happen if you put $1,000 into some stocks for your little one right when they’re born. Fast forward to their golden years, and bam! They’ve got funds for college and more!

That tiny investment could balloon into a whopping big number, kind of like planting a teeny seed and watching it shoot up into a giant tree.

I’m talking about setting up an investment account that’s just their size- yep, a brokerage account or a custodial account where they can start building their fortune, bit by bit.

So, let’s get into all the options you have to set your kids up for financial success:

529 Savings Plan

The 529 Savings Plan is a special kind of investment account that’s all about stacking up cash for your kiddo’s school days down the road.

The really cool part is that you’re in the driver’s seat. You can tweak things, switch up who’s going to benefit from this pot of gold, and really make it work for your family’s needs.

And guess what? It comes with some sweet tax perks that make it even more awesome.

Pretty much anyone can add money to it, making it a team effort to fund your child’s education.

You get to pick from a bunch of different baskets of goodies, like a low-cost index fund or ETFs, to make sure this treasure chest gets bigger and better over time.

You can use an online investor like Betterment or Upromise to open a 529:

Betterment is great for hands-off investing- it’s a robo-advisor that rebalances the portfolio and has tax advantages; check out my Betterment Review to learn more!
Upromise is a special service- you can link your cards, and Upromise will round up your purchases and invest the difference.

UGMA Custodial Brokerage Accounts

UGMA Custodial Brokerage Accounts strike a balance between a neat way to kickstart a child’s education about investments and a practical tool for financial planning.

You’re setting up a brokerage account where kids can explore the stock market, mutual funds, and more under the watchful eyes of a guardian until they’re mature enough to take the reins.

You can use M1 Finance to open a UGMA (plus a UTMA below!) and use their pre-made investment pies to find some steady, long-term investments perfect for growing money as your kid grows up.

Tax-wise, these investment accounts have their charm. Contributions can be made up to $18,000 in 2024 with fewer tax bumps, allowing the savings to grow more efficiently.

When college application time rolls around, this investment account steps into the spotlight since they’re in the minor’s name, potentially nudging the financial aid calculations.

UTMA Custodial Brokerage Accounts

UTMA Custodial Brokerage Accounts are pretty cool when you think about it. They’re not just about dipping your toes into stocks, bonds, or mutual funds.

Nope, they open the doors to investing in tangible stuff, too, like real estate, collectibles, or even art.

It’s like giving kids a real-world tour of investment possibilities beyond the usual and putting more eggs into other potentially profitable baskets.

Learning about market ups and downs is one thing, but learning the real value and growth potential of tangible assets? That’s next-level education for any young investor.

By the time they’re set to take over their UTMA account, these young folks are going to be all set to chart their own course in the vast ocean of wealth-building.

Custodial Roth IRA

Setting up a Custodial Roth IRA for the young ones in your life can grow into a full-blown money tree by the time they’re thinking about retirement.

With a Custodial Roth IRA, an adult- like a parent or guardian- can start investing in stocks, bonds, or other long-term investments on behalf of their child.

All the growth within this account, I’m talking dividends, interest, capital gains, you name it, grow tax-free.

There are contribution limits each year. The contribution limit in 2024 is $7,000 a year or $8,000 a year if you are 50 and above.

And when it’s time for your child to retire or they need to pull money out for other qualified expenses, they can do so without paying a penny in taxes on those earnings.

You can use Empower to set up a Custodial IRA- we had signed up for budgeting and money management, but this app has opened doors to investing for our kids!

Custodial Traditional IRA

The Custodial Traditional IRA is all about giving kids a leg up in the world of saving for the golden years, but with a twist.

It’s pretty similar to the Roth IRA, but a traditional IRA plays by a different set of rules when it comes to taxes.

With this account, the money put away gets to grow without the taxman dipping his hands in the pot until it’s time to take it out. That’s when taxes come into play.

Setting one up means you’re laying down some serious groundwork at a financial institution that could help their money balloon over time.

And because you’re the adult in charge until they’re age 18 (in some states, age 25), you do the work on getting investment growth journey and teach them about it as they get older.

Different Investment Options

If you plan on starting a custodial account for kids with the stock market, it’s important to learn about setting up a brokerage account or a youth account.

Creating a diversified investment portfolio by investing in index funds and mutual funds and buying stocks for kids helps kids invest in different investment accounts.

ETFs

Exchange Traded Funds (ETFs) can give your child a taste of the entire stock market in one go.

Think of it as investing in a big basket that holds a bunch of different stocks or assets.

This way, with just one investment through a custodial account, your child can own a piece of all those companies or bonds, making it an efficient way to start learning about investment management.

Investing in ETFs comes with a bunch of benefits. They’re known for:

Diversification: Because ETFs hold many different assets, they spread out risk more than investing in a single stock might.
Safety: While all investments have risks, spreading them across various stocks or bonds in an ETF can offer a safer route compared to putting all your in just investing in individual stocks.
Practicality: ETFs are easy to buy an Exchange Traded Fund and also sell them, much like stocks on the stock market, making them a straightforward option for getting your child interested in investing.
Comprehensive coverage of the market: You can cover whole sectors or the entire market in one investment, giving a broad exposure that would be hard to achieve otherwise.
Cost-effectiveness: Generally, ETFs come with lower fees than buying many individual stocks, making them a cost-effective choice for investment choices.

You can invest in ETFs using a platform like Robinhood– where it’s commission-free investing!

Index Funds

Index Funds are a smart pick for getting a big piece of the market pie with just one investment.

For parents or guardians eyeing investment choices, index funds offer a low-hassle way to help kids’ savings grow over time.

By mirroring a specific market index, these funds offer a straightforward route to broad market exposure and diversification.

What’s cool about index funds is how they manage to keep costs down.

They’re known for having low management fees because they’re passively managed- no need for a team of analysts picking stocks, which also means fewer expenses passed on to investors.

They’re a good fit for custodial accounts, where you’re aiming to build a foundation for future financial savvy without the steep learning curve or the high fees that can eat into growth.

Mutual Funds

Mutual funds in a custodial account are a great way to get kids into investing.

They’re like a big pot where everyone throws in their money to invest together. This pot is then used to buy a bunch of different investments, like stocks or bonds.

They spread out the investment to lower the risk and are managed by pros, making them a solid choice for helping kids grow their savings over time.

This way, with just one investment, you get a piece of a lot of different places, spreading out the risk.

When you open a custodial account for a kid, it is set up by an adult for a minor, and it can hold mutual fund investments until the kid is old enough to manage it themselves.

Plus, it’s handled by professionals who pick and choose the best places to put the money to work, so you don’t have to worry about the details.

Large Dow Companies

When it comes to introducing kids to the stock market, picking out big names from the Dow Jones Industrial Average can be a smart move.

Why? Investing in large, well-known companies can offer both the chance for growth and a bit of stability, which is pretty cool for someone just starting.

These big companies, let’s say the folks who make iPhones or the biggest names in software, healthcare, beverages, and payment processing, have been around the block.

Some examples of Large Dow Companies to buy stocks in include:

Apple Inc.
Microsoft Corporation
Johnson & Johnson
The Coca-Cola Company
Visa Inc.

What NOT To Get Into

NO Penny Stocks

It’s wise to avoid Penny Stocks, especially for young investors. These stocks are typically priced very low and can be quite volatile, leading to significant risks.

Their low price points might make them seem attractive, but they’re prone to sudden and unpredictable changes in value.

Plus, Penny Stocks can be targeted for market manipulation due to their low trading volumes, making them less reliable and more susceptible to sharp price swings.

Avoid Crypto

Cryptocurrencies, while trendy, might not be the ideal investment avenue for kids to make sure their investment portfolios earn a steady income- steady being the keyword!

Their highly volatile past performance and the unpredictability of their market value make them a risky choice.

The rapid fluctuations in prices can lead to potential losses just as quickly as gains, making it challenging for young investors to navigate.

For those new to investing, it’s generally recommended to opt for more stable and understandable investment options like I listed above.

FAQs

How can I invest for my child?

When it comes to investing for your child’s future, you’ve got a few options to choose from. You can consider custodial accounts like IRAs or even a 529 Savings Plan.

Each of these accounts comes with its own set of features and benefits, so it’s worth taking the time to explore each one to find the best fit for your child’s needs.

It’s important to think about the long term when investing for your child’s future.

Consider long-term investments that can grow steadily over time, harnessing the power of compounding to build wealth.

A great way to teach your kids about money and investing in the stock market is by showing them how investments work and helping them understand why saving for the future is important.

Can I buy stocks for my child?

Yes, parents can buy stocks for their children through custodial accounts or other investment accounts designed for young investors.

These accounts allow parents to manage stock purchases and other investments until the child reaches the age of majority.

What should I invest in?

When it comes to deciding what to invest in for your kids, it’s all about what your financial goals and risk tolerance are.

Here’s a breakdown of some options to consider:

ETFs
Index Funds
Mutual Funds
Individual Stocks (Nintendo, Disney, etc.)

By diversifying your investments for your kids across these options, you can build a balanced portfolio that has steady growth over time.

And remember, it’s always a good idea to consult with brokerage services or financial advisors who can provide investment advice tailored to your specific needs and goals.

Plus, with online brokers, investing has become easier than ever and features like fractional shares allow you to buy exchange-traded funds with smaller amounts of money.

What stocks are good investments for kids?

When you start investing and choose stocks for kids, it’s all about striking a balance between stability and potential growth.

Good investments for kids include well-known, stable companies like Disney, Apple, and Nike stock, as well as diversified index funds and ETFs.

Buying stocks that your child finds interesting can also make the investment process more fun and educational.

What is the best stock to buy for kids?

When buying stocks for kids, it’s important to consider factors like the company’s ability to innovate and its track record of revenue growth and past performance.

And with the rise of online brokers, investing in stocks like Disney, Nike, and Mattel has never been easier.

Just remember to do your research and consider your child’s interests and investment goals before making any decisions.

How much money should I invest?

The amount of money to invest really depends on your individual financial goals and circumstances.

Whether you’re looking to save for your child’s education, build a nest egg for the future, or simply teach kids about investing, there’s no one-size-fits-all answer.

Even a small investment can grow significantly over time, thanks to the power of compound interest. So, don’t be discouraged if you can only invest a little at a time.

Every dollar counts, and starting early can make a big difference in the long run.

How to invest $1,000 for my child?

Investing $1,000 for your child’s future is a fantastic idea, and there are a few options you can explore to make the most of that investment.

One option is to open a custodial account with a free brokerage platform.

These accounts typically have no account fees or subscription fees, allowing you to invest your $1,000 without worrying about additional costs eating into your investment returns.

Another option to consider is a 529 plan, which is specifically designed to help families save for education expenses.

How much money can I make?

When you invest money, the returns can depend on different things, like the stock performance or other investments you choose, how much you invest, and how long you stay invested.

It’s important to consider any account fees or subscription fees associated with your investments, as these can impact your overall returns.

By minimizing fees and expenses, you can keep more of your investment gains.

Starting early and investing consistently can help maximize your potential for growth over time, contributing to your personal finance goals and financial security.

And remember, you can always sell stocks if needed, but staying invested for the long term is often the key to achieving significant returns.

Final Thoughts

Opening investment accounts and investing money for your children is one of the best ways to set them up for financial freedom.

That money can make a huge difference in going to college, affording a home, starting a business, and so much more! 

Plus, introducing children to investing can provide valuable lessons in financial literacy that will stick with them for the rest of their lives.

From 529 Savings Plans and custodial brokerage accounts to investing in popular kid-friendly brands, the options are many and varied.

Remember, it’s important to start early, invest consistently, and focus on long-term growth. So, why not start planting those financial seeds today?