I'd like to create a savings fund for my grandson and also
encourage him to take an interest in investing. For my own
children, I set up dividend reinvestment plans years ago, but I
haven't heard about DRIPs in a long time. Are DRIPs still the best
way for kids to get started in investing? --E.G.L., Lutherville,
Dividend reinvestment plans used to let your get kids started in
stock investing without having to open an expensive brokerage
account. But DRIPs became less popular when brokerage firms made it
easier to open custodial accounts. Now, many offer custodial
accounts with no or low minimums, low commissions, and plenty of
investing options. These custodial accounts also allow faster
trades than with DRIPs, which are traded only at certain times.
, for example, has no minimum investing requirement for custodial
brokerage accounts, charges $9.99 for online stock trades, and
offers 100 commission-free exchange-traded funds and hundreds of
no-transaction-fee mutual funds.
lets you open a custodial account with just $100, charges $8.95 to
buy or sell stocks online, and charges no commissions on Schwab
ETFs. Fidelity requires a minimum investment of $2,500 for
custodial brokerage accounts but then charges just $7.95 to buy or
sell stocks. It offers 76 commission-free ETFs and more than 2,900
funds with no transaction fees. At all three firms, you can
automatically reinvest dividends at no charge.
The commissions can add up, however, if you buy shares every
month or so. In that case, consider
automatic investing plan, which lets you schedule purchases of a
set dollar amount on a one-time, weekly, biweekly or monthly basis
for $3.95 per investment. You can invest in more than 7,000 stocks
and ETFs. All trades are executed on Tuesdays.