Stock, savings bond or savings account for my grandchildren?

Question

Not sure which would be better for a gift to my grandchildren. Riley is 1 1/2 years old and Ethan is 9 months old. Will spend about $50 each towards their Christmas.

Answer 1

The initial deposit is $50 for each grandchild. Will there be subsequent contributions to follow?

Depending on how you answer that question will determine the best option. I am an investment banker for 15 years and have always believed in diversification of your investment portfolio. Stocks have historically outperformed any other asset class over time, but they can come will sales charges from a broker and set up fees to open the account. To that end ... if the initial investment is $50 and no other contributions will be made, then I would stick with the savings account option. Once the children have saved more in the account, they could invest in mutual funds or stocks. They might even consider opening an education 529 plan with the money.

Mutual funds may be a great alternative to stocks for the duration. They tend to perform well and have less risk than stocks. If you decide to go this route look for no load mutual funds with low expense ratios. The expense ratios are invetsment mangement fees and 12b-1 fees. The typical mutual fund charges less than 2% management fees.

I hope this helps.

Answer 2

Savings account will be easiest to set up, but will return the least amount of money. Stocks have the highest return of any asset class in history, but will take some effort to set up for your grandchildren.

I prefer stocks myself, but they are also the most volitile of the three. Since your grandchildren are young, I would go with stocks.

Answer 3

Buy them a single share of a stock. Get them to issue it in certificate form and frame it.

Disney stock makes for a nice gift.

Answer 4

mutual fundz