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MONEY-SMART KIDS
Buying Stocks for Kids
by Janet Bodnar

• Each of my three lovely children has a few hundred dollars, with which I would like to buy a few shares of stock to use as an investment and a teaching tool. Where can I buy a few shares at a time, as cash permits, and pay discounted commissions? Stocks that the kids can relate to would be my first choice, such as Coca-Cola, McDonald's or Walt Disney.



• How should I go about starting a dividend-reinvestment plan for my 5-year-old grandson and soon-to-be-born granddaughter?

First off, one of the best ways to purchase stock in small amounts is through ShareBuilder. The commission is a low $4 per trade, and there's no investment or account minimum, or inactivity fee.

In addition, ShareBuilder lets you buy fractional shares. If you invested, say, $200 for each child in a stock trading at $16 a share, each of them would own 12 1/4 shares (less the $4 commission).

Another option: Hundreds of companies will sell you stock directly, letting you bypass a broker (for a listing, visit NetstockDirect). Minimums, fees and plan requirements vary.

All the companies you mentioned have direct-purchase plans. Coca-Cola offers the best deal: a minimum initial investment of just one share, with no enrollment fee. McDonald's, on the other hand, requires a minimum initial investment of $500 and charges an account setup fee of $5. Walt Disney is the most expensive, with a minimum initial investment of $1,000, a setup fee of $10, plus a commission of 2 cents per share.

No matter how you purchase your shares, once you own stock in a company you can join its dividend-reinvestment plan (DRIP), if one is available. Besides automatically reinvesting your dividends, a DRIP lets you buy additional shares of stock.

The Temper Enrollment Service specializes in purchasing the number of shares needed to enroll in a DRIP -- sometimes as few as one, which lets you bypass high minimums for company-direct plans. Temper will also set up your DRIP. For fees and terms, go to www.directinvesting.com.

Another direct-investing option is the Low Cost Investment Plan of the National Association of Investors Corp. NAIC members can purchase shares in a select number of companies. Membership costs $50 a year for adults, or $20 for young people 18 and under, and includes other NAIC publications and services.