Investing for Kids: The Top Stocks to Buy

Best Stocks To Buy For Your Child: Selecting the right gifts for kids isn’t easy. Most adults struggle to keep up with the latest toys and electronics, and more often than not, new acquisitions lose their appeal within days of being unwrapped. Parents, grandparents, family members, and friends don’t always find the gift-giving ritual satisfying. Many search for alternatives that can serve the dual purpose of appealing to children and creating long-term value.

Of course, there are a variety of financial products designed to secure children’s futures – for example, 529 college savings plans, savings bonds, custodial Roth IRAs, UGMA and UTMA accounts, and standard savings accounts and Certificates of Deposit (CDs). However, these rarely inspire excitement in young recipients. What does excite them is an opportunity to become partial owners in their favorite companies.

Buying stock for children is becoming more popular every year, and online brokerage firms have made it easier than ever. Trading is free, and there are no minimum balance requirements. But how do you buy stock for children? And which stocks make the best gifts for kids?

How To Explain Stocks To Children

Gifting stock to children is a smart way to encourage financial literacy and build the foundation for a secure financial future. However, it is difficult for kids to appreciate what they don’t understand.

A discussion of how stocks work should be tailored to the individual child’s age, level of interest, and sophistication – but there is no need to wait for high school to begin the discussion.

If kids are interested in the topic, more details may be added. Explanations can be more complex as the child gets older.

How To Buy Stocks For Kids

It is possible to invest in stocks through any of the standard children’s savings plans, including 529 college savings plans and custodial Roth IRAs. However, that’s not always practical when extended family members and friends want to contribute.

Another option is a Custodial Brokerage Account, which essentially allows an adult, the custodian, to invest on behalf of a minor child. These fall under the Uniform Transfers/Gifts to Minors Act (UTMA/UGMA), and funds can be used for any purpose related to the child – not just education.

It is important to note that funds in Custodial Brokerage Accounts are considered the property of the beneficiary. When children reach the age specified by state law (between 18 and 25), they take control of the account. That’s a little different from 529 plans, which can be transferred to another beneficiary if the original beneficiary doesn’t use the funds for education.

Nearly every major brokerage firm is able to assist with opening a Custodial Brokerage Account, including online platforms like SoFi Invest and Robinhood.

Families may also choose micro-investing platforms like Acorns, Stockpile, and Stash. These allow small trades and the purchase of partial shares. It is possible to start buying stock for kids with as little as $1.

What Is A Good Stock To Buy For A Child?

If the goal is to get kids involved in investing or to give a gift that will generate some excitement, individual stocks are the best choice. Begin by selecting from companies that are familiar to the child – preferably those that sell products and services that the child uses and likes.

Aside from that, the same criteria used for other investment decisions apply to these trades. Companies should be screened for strong financials, skilled leadership, and in-demand products that can withstand competitive threats.

Apple Stock

Whether they own iPhones or not, kids know about Apple products. Becoming an owner of Apple stock carries the sort of prestige that teens and tweens love.

Better still, Apple has the hallmarks of a quality company that will appreciate in value over time. Including Apple shares in a child’s portfolio increases the likelihood that there will be funds available for the substantial expenses they will encounter when they reach adulthood.

Build-a-Bear Workshop Stock

There is no age limit when it comes to enjoying Build-a-Bear products.

Build-a-Bear stock is a good choice for fans of all ages, but it is especially attractive for the youngest investors. They are familiar with the brand and understand the company (to a point), so they are far more interested in learning about the gift.

More importantly, analysts expect Build-a-Bear stock to go up over the next year, making it as smart as it is fun.

Disney Stock

When in doubt, Disney stock is always a great present. Though in many ways, Disney is similar to other entertainment companies, there is always a touch of magic where Disney is involved.

Everyone has a relationship with at least one Disney character, and most people have fond memories of Disney trips, films, and programming. Giving kids the opportunity to own a bit of the magic is the sort of gift they will treasure for a lifetime.

It doesn’t hurt that Disney stock is widely considered a sure thing from a long-term profit perspective. Though the company has had a bit of a rough patch over the past year, no one doubts that a turnaround is all but inevitable.

Electronic Arts Stock

Gamers have a natural affinity for Electronic Arts stock because the company makes some of the world’s most beloved games. A few of the biggest names on its product roster include The Sims, Medal of Honor, Star Wars, and Madden NFL.

Owning Electronic Arts stock gives kids bragging rights which will be amplified when the company releases its next big title.

On the financial side, Electronic Arts stock is of particular interest because it managed to avoid the devastating tech stock downturn of 2022. While other stocks dropped, including Activision Blizzard (down nearly 15 percent year-to-date) and Tencent (down more than 30 percent year-to-date), Electronic Arts stock stayed relatively steady. Share prices are down just seven percent since the start of 2022.

Netflix Stock

Parents rely on Netflix to access quality children’s programming without worrying about objectionable content and excessive advertising.

The digital streaming pioneer transformed how families manage entertainment, and kids are some of Netflix’s most loyal users. They know and understand the brand, which makes Netflix stock a logical choice when gifting.

From a growth perspective, Netflix stock appears to be holding its own despite intense competition. Though plenty of entertainment companies have made a play for the digital streaming market, none have managed to make a significant dent in Netflix’s market share.

Yes, users are adding subscriptions to other services like Disney+, Hulu, and HBO Max, but those tend to be in addition to Netflix – not instead of Netflix. If the company can maintain its wide moat, Netflix stock will be an integral part of long-term portfolios.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.