Toys are great, but why not go one better this holiday season? Buy your child a piece of the toy store.
A share or two of Toys "R" Us, for example, should last longer than the latest action figure from Monsters Inc. In fact, the investment and more importantly, the knowledge about investing might help your child buy your grandchildren a truckload of action figures.
A gift certificate to McDonald's will be eaten up quickly, but stock in the company could help put more than burgers on your child's grown-up table.
C. Mitchell Conover, assistant professor of finance at the University of Richmond's Robins School of Business, says he plans to give stocks to his children and nieces and nephews this Christmas "instead of junk toys."
Conover plans to give his three children--ages11, 9 and 6--shares of companies they're interested in: such as Nintendo, Disney or Sony.
Investment advisors like Peter Lynch always say to invest in something you understand," Conover says. "You're in trouble if you don't know what the company makes."
Choosing companies that children can relate to also makes it easier to explain what stocks are all about and why a certificate is really a very nice gift, even nicer than a toy. Conover believes all of his children will be able to grasp the concept, even his six-year-old.
"He's so into money," Conover laughs, "if I tell him he will make money, he will be interested in it.
"Also, I will be able to tell my boys, 'Every time Nintendo sells a GameBoy, you're making money. You're an owner now.'"
Conover suggests using an online service, such as Quicken, to avoid high commissions. Also, his boys could make Quicken their home page and keep regular tabs on their stock. ShareBuilder also is good, he says.
An e-trade service also can help make stocks a learning experience, Conover believes. It can show which companies' earnings are growing over the last several years, as well as their price-earnings ratios, he says.
Conover suggests a buy-and-hold strategy for children. "I don't think children should get into trading," he says. The most important thing is to get them to understand you're investing for the long haul."
Conover says $30 to $50 is a reasonable target to spend on each stock gift. ###
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