ShareBuilder Promotion on Kids Investment Accounts
December 13, 2009
ShareBuilder Promotion – $25 Stock Gift Offer
ShareBuilder is running a promotion for anyone who wants to open a custodial account. If you open an investment account for your kid, ShareBuilder will match the first $25 you deposit into the custodial account.
Right after I read about the account bonus offer I saw an interview on Fox Business news with Dan Greenshields, the President of ShareBuilder, that talked about giving stock as a gift and ShareBuilder’s custodial accounts. He estimated that about 10% of their business are custodial accounts and the average balance of those accounts is around $1,000.
Buying Stock for Kids with ShareBuilder
With balances in the $1000 range, it sounds as though many parents see the ShareBuilder account as more of a way to teach their kids about the stock market and investing than as a way to pay for their college education. Greenshields mentioned that many parents will buy their kids stock in the ShareBuilder once or twice a year, at Christmas and maybe on their birthday. Since ShareBuilder allows you to buy partial shares of a stock or fund, parents can buy on events like these without having to worry if they’e putting in enough money to buy a whole share.
Although parents can buy 8,000 different stocks or funds through Sharebuilder, a lot of moms and dads buy stocks of companies that their kids might be familiar with like Disney, Apple, or Marvel (comics). Some of the other popular stocks held in custodial accounts are Google, GE, and an S&P 500 ETF. According to Greenshields you can also use a Coverdell ESA to save for college instead of a custodial account.
Do Kids Want Stock for a Gift?
The lady interviewing Greenshields commented that not many kids are probably very excited to get stock as a gift. My guess would be that it’s probably true when kids are younger and that they won’t really start to appreciate it until they get older.
However, I think it’s still a good idea and it even makes sense to buy it when they’re young. That way when they’re teenagers they can look back at how you’ve been steadily investing in the account for a number of years and how it’s value has increased. Of course over a shorter time period, especially the last 5 years, they won’t have as much to show for their money. But if it’s a longer timeframe, say 10 years, then the money you’ve been investing might make an impact on their teenage brain.
When they see you’ve been putting money away for a decade and now it can help them buy a car or contribute toward some other big purchase, hopefully they’ll see the value of investing over time.
My Experience with Stock Gifts
I started asking for shares of Wal Mart stock for birthdays and Christmas when I was in elementary school. Of course ShareBuilder didn’t exist back then so my grandparents would just give me IOU’s for the stock. Here’s something I shared as part of my grandfather’s memorial on this site:
My wife’s engagement ring will always remind me of my grandfather because he was the reason that I, as broke college student, was able to afford it. Ever since I was a little kid, he would excitedly tell stories of speeches given by Sam Walton at the Wal-Mart shareholder meetings.
All the enthusiastic talk of splitting stock and doubling shares convinced me to ask for Wal-Mart stock on every gift giving occasion as I grew up. The constant growth and splitting of the stock over the 80’s and 90’s left me with more than enough shares to fund the purchase of a diamond engagement ring when I met the love of my life in college.
I can still remember sitting at the bus stop one morning in 5th grade and figuring out how much all that Wal-Mart stock was worth. Of course, not every kid will be as much of a money dork as I was (am) but getting gifts of stock definitely made an impression on me.
I do think watching the balance grow is kind of infectious. During the interview, Greenfield noted how his son actually puts part of his allowance into his Sharebuilder account. Of course, his dad’s the president of the company so I wouldn’t expect that as a typical result. However, I think once a kid starts seeing some growth in their account (due to contributions and/or appreciation) they’re more likely to be excited about investing.
If you think that your kids will respond the same way to having their own shares of stock that I did then the ShareBuilder promotion they’re holding would be a good way to get started. As I mentioned earlier, ShareBuilder announced it will match the first $25 deposited into a new custodial account.
One of the reasons that ShareBuilder can be a good way for investors to get started in the market is that they let you buy stocks for only a $4 fee. Since there are no account minimums and no inactivity fees, they are pretty good for custodial accounts that only have a little money invested just a few times a year.
You can open a ShareBuilder Custodial account by clicking here.
All posts by Ben Edwards