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With the holidays coming up, I thought I’d address gifting. Unable to contain my practical side, my suggestion for gifting to children should be corporate stocks. Forget the useless toys and crap that ends up in a junk pile. Hopefully you donate those things when your child outgrows them, not add to our garbage landfills.
Give a gift that gives back. This year, buy a dividend-paying corporate stock. Your gift can extend past the holidays by educating them about stock investing. Plan small, ongoing lessons throughout the year to generate enthusiasm for investing. This could be the most valuable gift that you can give a child. You would be laying a foundation for their future wealth.
Some suggestions for stocks for a child that are household names:
Promote an Ownership Mentality
David Bach talks about his first knowledge of stock ownership. His grandmother took him to McDonald’s and told him there are three types of people. The buyers, who visit and buy food. The workers, that serve, take orders, and clean the kitchen. Then, the owners, that own the place. She told him that he should be an owner. From that conversation, he had the beginning blocks of wealth accumulation. His grandmother taught him to buy assets. Assets that appreciate, not depreciate.
When reading Fastlane Millionaire, I was impressed with one of the author’s concepts. The author persuades the reader to develop a producer mentality. That’s a monumental shift in thinking. With all the marketing thrown at us, companies want us to be users and consumers, buying endlessly. When one thinks about being a producer or being an owner, they interact differently with the world. This ties in to understanding how businesses make money.
Emphasize the magic of dividend reinvesting and compounding. Earnings dividends is effortless and when the dividends buy more shares, it’s a gift. The snowballing of this cycle over a long period of time is mind-blowing. For my dividend paying stocks, I like to see how many shares are needed to generate a dividend to buy a full share or two, instead of fractional shares. It provides a challenge that could be turned into a fun game.
Another idea is to understand all the brands that a business owns. Not many people know that Kimberly Clark owns the Scott, Cottonelle and Kleenex brands.
Create a challenge; make up a game, everyone loves a challenge. Offer to contribute money to their account if they track a gain or loss update.
Provide investment material; take some books from the library and leave them around, pay a dollar amount to invest for every section they read and give a summary on.
I wish someone in my family had done this for me. But, in the 60s and 70s, money management went as far as a savings passbook and a CD account.
My parents were into real estate, but they didn’t have the typical success story. I never understood all the events, but it didn’t work out very well. It sometimes doesn’t; that’s an example of a heavy investment into one or two properties; as opposed to small investments in stocks where one loss won’t cause too much suffering.
There are so many lessons by doing this. I’ve read comments on the internet about people that aren’t high wage-earners still teach their children about investing. It shows that you don’t have to be a millionaire to be an investor.
Open a custodial account and fund it with a few shares of their choice.