WITH Thanksgiving less than two weeks away, it is time to think about stocks, bonds and mutual funds as practical children's Hanukkah and Christmas gifts. For shares to be registered correctly for gift-giving, give your broker four weeks to do the job.
For children under 18, securities must be registered in either the mother's or father's name as custodian. Example: "Esther Jones custodian for Samantha Jones Under the Maryland Uniform Gifts to Minors Act." When the child reaches 18, the shares must be re-registered in the child's name.
Unlike traditional youngsters' presents -- many of which land on a closet shelf after New Year's Day -- financial gifts provide educational value and probable growth.
As Kiplinger's Personal Finance Magazine (November) says, "A gift of stock or mutual fund shares can be a great way to introduce a child to the importance of saving and investing."
Here are details of various categories in order of my preference:
STOCKS: These make fine gifts for youngsters. Over 75 years, stocks have climbed an average 10.5 percent a year, twice the return on bonds. Also, children learn to take an interest in investments by reading annual reports, interim statements, etc. Give stocks of high-quality companies children can relate to -- Disney, Hershey, Coca-Cola, McDonald's, Toys 'R' Us, etc.
MUTUAL FUNDS: Funds give diversification, professional management and growth potential. Children can find most mutual funds listed in The Sun and other financial pages. Brokers have performance records to help you choose the right funds.
SAVINGS BONDS: They are safe, there's no cost to buy them, and they grow in value. If lost, they are easily replaced. Unhappily, savings bonds are unlikely to stimulate a child's interest in investing. Buy them from your bank at least four weeks in advance so the bonds can be delivered on time. (Kiplinger's says, "Bonds are sold at 50 percent of face values so you look twice as generous. Face values start at $50.")
CASH: This is an easy last-minute gift, but the money will probably be spent and forgotten in a few months.
MID-MONTH MEMOS: "Plan to be completely debt-free at your targeted retirement age. This includes your home mortgage and any college debt you may have incurred for your children." (Dick Davis Income Digest)
"Black Monday was a doozy -- short, sharp and wiped out several months' gains. But the bull market remains intact. The plunge was not unexpected as stocks had not suffered a 10 percent decline since 1990. This correction was overdue." (Cabot Market Letter)
Pub Date: 11/14/97