My 8 year old just bought his first stock today. He’s very proud and was going to tell all his friends at school. No one will know what he’s talking about but I’m glad he’s happy.
It all started at Disneyland earlier this month. We were walking around he said something like
“Disneyland makes a lot of money!”
“They sure do! You could own a piece of Disneyland if you wanted to.”
“Oh yeah? Which piece?!”
I explained a little bit about how you can buy a very very very small piece of Disney. He was excited about the idea. When we got back to the condo that night I looked up the stock price on my phone. It was $71 and change. He is a big saver and has like $900 saved already so I actually think investing might be a really good idea. Granted, maybe individual stocks probably isn’t the recommended way to go but hey, it’s just a learning experience.
He was very excited and would have bought it right then if we had had the accounts set up.
When we got home he was still interested so I went ahead and got a UTMA brokerage account set up for him.
UTMA stands for Uniform Transfers to Minors Act which means that I’m the custodian of the account until he reaches 21. (18 in some states) When he reaches 21 the account transfers to him upon his request and I can’t stop that from happening. Which is fine since he is investing his own money anyways. I’m not giving him the money. It’s birthday money, or money for chores, or whatever. His money… not my money.
This type of account also has a few tax benefits such as the first $850 per year is tax free, and the next $850 is taxed at the child’s rate of 10%. Anything above that would be taxed at my rate. I can’t imagine that this will be much of an issue for a long long time, if ever.
These accounts do heavily influence financial aid when college comes around, since it is considered the child’s account. But in our case I’m not too worried about that since I would hope he would use any money in there to save for college anyways. I’d rather do that then take loans!
Anyways… setting up the account was pretty easy. I picked USAA for a few reasons but one was that they were running a promotion of 50 free trades. I was thinking 50 free trades would last him YEARS! Turns out that minor accounts didn’t qualify for the free trades. I explained the situation and they very kindly gave him 25 free trades for the next 90 days. Which was awesome of them. Excellent customer service was one reason why I went with USAA in the first place.
By this point, the stock price was about $75 so I transferred $80 into the trading account and waited 7 days for it to clear. Meanwhile, the stock is ticking higher and higher. I was getting nervous that $80 wasn’t going to be enough! It finally cleared on Feb 17th but it was a holiday so we still had to wait another day. The price was $79.32. I went ahead and put the trade in but I wasn’t sure what it was going to open at on Tuesday morning so I was pretty nervous.
Tuesday morning my son and I laid in bed and waited for the market to open so we could see if the trade would go through. That was very frustrating because the “Real Time Stock Price” websites are not really “real time”. It actually didn’t update until 7:45 (9:45 Eastern time). But to our relief it opened at $79.50 so the trade did go through. In fact, the high for the day was $80.00 exactly, which I thought was kinda funny.
So he is now the proud owner of one share of Disney stock.
Watch out Warren Buffet!