How To Give Kids The Gift Of Stock (2024)

When you ask a parent what their kids want for Christmas, they’ll likely start with a long sigh followed by, “Well… She really likes Ninjago and Dress Up.”

If you press further, you’ll find out that the parent is overwhelmed by the toys that the kid has, and they really aren’t all that excited about giving more plastic crap to their kid.

Enter, the gift of stock and investments. Giving a share of stock to kids is a fantastic way to avoid stressing out parents, help prepare a kid for their financial future, and teach a few lessons along the way.

Plus, as a millennial family, I'm personally tired of receiving all this junk. Think about it. Your child might receive upwards of 20 gifts every holiday season (Mom, Dad, Siblings, Grandparents, Santa, etc.). But by the middle of January, what they actually play with is down to 1-2 toys.

So, instead of wasting all that money on gifts (and then having a bunch of junk lying around the house), why not use that same money to invest in your child's future. This is a great option for extended family who may want to gift.

If that's you, then these are the best ways to give a share of stock to a kid, gifting investments, and even teaching them financial literacy topics in a fun way!

If you want to give a real share certificate to a child (and they become an investor as well), check out GiveAShare. You can purchase a framed share of stock (which makes the perfect gift), and they become a shareholder as well.Check out GiveAShare here >>

How To Gift Investments To Kids

Ask To Contribute To A 529

Buy A Share Of Stock

Ask To Contribute To A 529

In my opinion, the single best way to give stock to kids is to contribute to their 529 or ABLE accounts. Many parents have a few hundred or a few thousand dollars invested for their kids future, and they will appreciate every extra dollar that can be invested on behalf of their kids.

If you plan to give thousands of dollars to a special kid, you can set up a 529 account on your own and name the kid as a beneficiary, but for most people that’s an excessive gift.

Here's a breakdown of the best 529 plan in your state:

A more practical way to contribute to a 529 plan is to ask the parents if they have one set up. If they respond positively, you can ask them to invest your $20 or $50 gift on your behalf. This sounds like a measly gift, but it adds up over time. I have two kids, and they both have 529 plans that we’ve funded through cash they received for birthday and Christmas gifts. Their accounts each have several thousand dollars in them.

Buy A Share Of Stock

If a contribution to a 529 plan isn’t a realistic option (or your preferred choice for whatever reason), consider giving an actual share of the kid’s favorite stock (or an ETF). There are a number of websites dedicated to this exact option.

GiveAShareallows you to buy one share of stock and have the actual certificate (or replica certificate) framed as a gift. Your share is electronically registered as well - so you're a real share holder. Check out GiveAShare here >>

Publicrecently announced the ability to buy fractional shares and give them as a gift (they call them Stock Slices). Public charges $0 commissions to buy a stock slice. And then you can gift it to someone for the holidays (whether your children or someone else)!

If you want to look at all your options, check out our list of the best custodial investment accounts to open for kids.

Right now, there are a growing number of fractional share companies, but most of these companies don’t offer custodial accounts or they have high maintenance fees for people with small account balances.

Related:Where to Invest in Fractional Shares Of Stock

Set Up A DRiP Plan

Another way to buy a share of stock for a kid is to buy a Dividend Reinvestment Plan (DRiP) directly from a company.

To set up a DRiP, you have to buy a share of the company stock, and then sign up for automatic reinvestments of dividends. Plenty of kid-friendly companies like Hershey’s and Hasbro offer no-fee DRiP plans for shareholders.

Furthermore, most of our favorite free places to invest, such as TD Ameritrade, offer free dividend reinvestment within your account.

Don't Forget The Teaching Opportunities

Giving a share of stock is a good way to help a kid get on solid financial footing, but the lessons that come with it are even more important. When you give a special child a share of stock, consider giving them tools for financial literacy too.

If you feel comfortable with it, you could teach them how to evaluate a stock on Yahoo Finance, or you could give them a book that would teach them age appropriate lessons.

These are our top financial books by age range:

Age 0-4Money A to Z by Scott Alan Turner

Age 5-8A Chair For My Mother by Vera Williams

Age 9-11The Secret Millionaires Club by Andy and Amy Heward

Age 12-14The Young Entrepreneur's Guide to Starting and Running a Business by Steve Mariotti

Age 15-17The Money Savvy Student by Adam Carroll

Age 18+ I Will Teach you To Be Rich by Ramit Sethi

Are you planning (or have you in the past) given the gift of stock to your kids?

FAQs

How To Give Kids The Gift Of Stock? ›

In my opinion, the single best way to give stock to kids is to contribute to their 529 or ABLE accounts. Many parents have a few hundred or a few thousand dollars invested for their kids future, and they will appreciate every extra dollar that can be invested on behalf of their kids.

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How to give stock as a gift to a child? ›

You can transfer stocks from your brokerage account into a minor child's custodial account, which is set up at the same brokerage. Alternatively, you also can purchase stock for the custodial account. Once the child turns 18, the assets in the account belong to him or her.

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How do you explain what a stock is to kids? ›

A stock is a share in the ownership of a company. A bond is an agreement to lend money to a company for a certain amount of time. Companies sell securities to people to get the money they need to grow. People buy securities as investments, or ways of possibly earning money.

How does gifting stock to a child affect taxes? ›

Tax implications on gifting stock

As for the recipient, it isnt until she sells the stock that it will be taxed. Assuming the child sells the purchased stock much later in life, the sale would be subject to a capital gains tax.

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How do I gift shares to my child? ›

Complete a stock transfer form

Name of the company in which shares are held.
The amount of 'consideration money' that is being paid for the shares – if you transfer shares for free, this should be “Nil”
Description of security – this specifies the type of shares being transferred (e.g. if there is more than one class)

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Apr 9, 2024

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What are the rules for gifting stock? ›

As an early step toward passing down wealth

If you're thinking about your legacy, gifting stocks can be a valuable tool, as opposed to liquidating and paying capital gains taxes. As of 2024, the IRS allows you to gift up to $18,000 per year, per person — including stock.

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Who pays taxes on gifted stock? ›

Capital gains tax and gifting

As previously discussed, if you give existing stock to someone else, your cost basis will transfer to them. Since you didn't sell the investment, you won't owe any capital gains taxes — and the recipient won't pay taxes until they sell the shares.

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How do I gift a stock without paying taxes? ›

The annual gift tax exclusion entitles you to give away up to $17,000 per person per year as of 2023. You can use the lifetime exemption if the value of the stock is more than the annual exclusion. The lifetime exemption is $12.92 million as of 2023.

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Should I gift a stock to my kids or just let them inherit it? ›

Inheriting Stock

In general, if you have assets that have low cost basis it is usually better for your heirs to inherit the assets as opposed to gifting it to them. The concept is often times reversed for assets that have depreciated in value…..with an important twist.

Is it better to gift stock or cash to family? ›

Gifting stock can be more valuable than cash and a way to pass down wealth or give to charities. Stock gifts valued at less than $18,000 remove tax liability from the gifter. The recipient may be subject to capital gains tax, though the rate depends on their taxable income.

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What is the process of gifting shares? ›

Online transfer of shares

This process involves simply entering the recipient's details. Upon initiating the transfer, the broker sends an email and SMS notification to the recipient, prompting them to accept the gift within 7 days. However, the stocks remain in the demat account during this period.

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How do I gift shares from father to son? ›

The donee may also give a standing instruction to their DP. Gift Deed - For legal purposes, and in the event of an income tax - related enquiry, it is recommended that donors of gifts execute a gift deed on legal stamp paper when a transfer of shares is undertaken.

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Does transferring shares trigger capital gains? ›

Assets in a gain position When you transfer a security to a corporation where you are a shareholder, the transfer is generally considered a taxable transaction. You will need to report the capital gain on your personal income tax return.

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Can stocks be transferred to children? ›

Stocks can be given from an existing investment portfolio through a brokerage firm. They can also be given to children, which can be a valuable way to teach them about money, investing, and saving, or give them a financial bump at important times in their lives, like graduation or marriage.

How to gift shares to a minor? ›

Unlike regular Zerodha account holders, a minor cannot buy shares and government securities. They must be transferred to the minor account. They can be transferred using Zerodha's gift feature or through CDSL easiest.

What are the tax implications of gifting shares to family? ›

Section 47 exempts capital gains on gifting of shares, even though it falls under the definition of “transfer”. However, if the recipient of the shares falls under the definition of relative as per Section 56, then there is no tax due in the hands of the receiver.

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Do you pay tax on gifted shares? ›

No. a gift of an asset is only tax free when it is between spouses/civil partners or to a charity. as these shares are to her children, this is classed as a sale.