By Dan Greenshields
Do you have a grandchild graduating from kindergarten, high-school or college this year? Have you started thinking about what kind of gift you’ll give? A new study from Grandparents.com finds that American grandparents spend more than $50 billion annually on their grandkids. Of that astonishing total, $16 billion alone is going toward clothing and toys in the form of gifts. To put that in perspective, the amount of money grandmothers and grandfathers spend on glitzy party dresses, video game consoles, and crazy bracelets as graduation, birthday or holiday gifts is about ten times the government’s annual budget for the National Endowment for the Arts.
Despite the recession, America’s 70 million grandparents continue to be a gift-giving force.
Whether your grandchild is graduating from kindergarten, high-school or college this year, the act of gift-giving is about happiness, both on the part of the person giving the gift and the person receiving it. But here’s a question grandparents might want to ask themselves: Am I giving gifts just for immediate pleasure, or should I be thinking a little bigger about what a gift can mean for their future? A different Grandparents.com study found that grandparents spend nearly $1,700 on each new grandchild annually. Even if a small portion of that came in the form of stocks — instead of easily forgotten novelty gifts, for example — long term happiness could show big returns.
Introduce Young Minds to Investing
Giving kids stock isn’t just about the monetary value of the stock shares. It’s also about introducing young minds to the world of investing. Just like a new baseball glove inspires dreams of playing in the big leagues, a share of stock could spark a lifelong passion for numbers, economics, and current events. Let the kids help decide where to invest the money. No matter how his or her portfolio performs, they are getting a hands-on introduction to the world of finance — and financial responsibility.
In a world oversaturated with video games, social media, and television — 71 percent of children between eight and 18-years-old have a TV set in their bedroom, according to the Kaiser Foundation — kids may welcome a chance to stimulate their brains with something new. These days, kids can track their stocks’ performance any time they want, even on their smart phones.
Children who get interested in the stock market at a young age quickly learn how it works, and in many cases start to invest their own money in additional shares. Instead of tuning out to mindless reality TV, they might start flipping to CNBC or Bloomberg television for news. And who knows, they might even ask you for help.
Invest In Their Future
Investing, obviously, is also about accruing money and learning how to manage it. This generation of young people needs to understand money management just as much as their older counterparts.
A good introduction to investing is by purchasing stocks through a custodial investment account. These accounts give kids ownership over their portfolio but also give their parents (or grandparents) managerial authority. Custodial accounts are typically set up in the child’s name, which could offer a nice tax benefit while also teaching the value of investing. Because these accounts are for minors almost exclusively, some brokerage firms offer reduced fees and waive minimum purchase requirements. Part of the joy of grand parenting is spoiling your grandkids. Instead of doing it just with trendy toys, give a gift that will help get them to their next graduation and beyond. Your grandchildren will thank you now and later.
Dan Greenshields, CFA, is President of ShareBuilder Securities Corporation, a subsidiary of ING Bank, fsb. For more information, visit www.sharebuilder.com/gift.