Buying stocks isn't the first thing that comes to mind when coming up with gift ideas for a tot.
However, buying stocks for babies is a very savvy financial move. Not only are you gifting them something that might be worth a lot more in the future—but you're also laying the groundwork for a solid financial education.
Unfortunately, a lot of parents don't realize the importance of educating their children on money matters. Reports reveal that 25% of Canadian parents don't talk about money with their kids.
If you buy stocks for your baby, by the time they can speak they'll already have a portfolio. Once they reach the age when they're ready to learn about investing, you can teach them how to build onto this portfolio.
By the time they reach adulthood, they'll have a big head start, both on their savings and their financial literacy.
If you are not sure where to start when it comes to buying stocks for babies, listed below are the best baby stocks to buy in 2022, as well as information on how to buy stocks for babies.
What Are Stocks for Babies?
If you're wondering what are stocks for babies exactly, they are simply stocks that tick the boxes for being good "buys" for babies.
They aren't stocks in infant-related companies. Stocks for babies can be any kind of stock that will stand the test of time and yield a good return on investment.
Besides these criteria, it can also be advantageous to select stocks that kids can relate to and whose companies and offerings they're likely to interact with. For instance, holding stocks in something like Nintendo will probably be a lot more meaningful for a kid than holding stocks in a mining or pharmaceutical company.
This doesn't mean that these types of stocks are necessarily bad buys for babies. They could still produce a good return on investment and yield reliable dividends. However, once your little one gets older, they're likely to get more excited at the idea of owning shares in a company they use than something they've never heard about.
How Do Stocks for Babies Differ from Regular Stocks?
Like we said above, stocks for babies are regular stocks, and not necessarily related to any products or services in the infant market. By the time your child becomes old enough to learn about their stocks, would they want to own a share in Gerber?
Even though Gerber stocks might have performed well, it will probably be more engaging for your kid to learn that they own stocks in a company like McDonald's that is familiar to them. These kinds of stocks can be great savings vehicles for children, and if they can relate to the companies they'll probably be more interested and motivated about their portfolio.
So how do stocks for babies differ from regular stocks?
Firstly, they should be stocks in companies that are likely to be around throughout your kid's childhood. The last thing you want is to buy stocks in a company that fails or becomes obsolete. This can be hard to predict in these fast-paced times when things are constantly changing.
However, there are ways of gauging a company's longevity with its level of innovation, what it offers, and its size. For instance, while Facebook used to be the top social network and dominated by youngsters, its market share has fallen. Now, Gen Z teenagers are calling it the "boomer social network" and saying it's "made for old people"
However, Facebook as a company is far from dead, and it is also developing a number of technologies that are likely to play a big role in young people's lives for years to come. One of these is the futuristic Metaverse, which promises to bring the power of VR into experiences like online shopping and entertainment.
In short, Facebook (now Meta Inc.) is by no means limited to the "boomer" social platform that was its start. It now owns other social giants, including Instagram and WhatsApp. All of these factors make it a good option to consider when buying stocks for babies.
In summary, the best stocks for babies are typically well-established stocks that promise longevity into the future. They should also be stocks that kids and teens can relate to and which mean something to them.
Best Baby Stocks to Buy in 2022
We've gone over what are stocks for babies, and how stocks for babies differ from regular stocks—but what exact stocks promise to be good buys, ones that will provide benefits for a lifetime?
Below we get into some of the top stocks for babies and dive into their historical growth rates, their likely growth and value in the future, and why they are especially suited for youngsters to hold.
Tesla (TSLA)
One of the top stock picks for babies and kids is Tesla stock. Tesla, Inc. specializes in fully electric vehicles. Besides this, they also sell renewable energy products, including energy storage systems and solar panels.
At the time of writing, the Tesla share price is hovering around $1367. Five years ago, Tesla shares sold for around $48. During this period the value has skyrocketed, growing by a roughly 3,025%.
Tesla stocks have already achieved impressive growth, and many market experts see this continuing. For instance, Cathy Wood from Ark Invest recently published a report detailing the possible growth of Tesla stock over the next five years. Her price prediction of $3,843 by 2025 lines up with what Elon Musk himself has said he thinks the stock is worth.
Looking further into the future, it's not unlikely that the electric car company's stock will continue to rise in value, albeit maybe at a slightly slower pace.
Over the last few years, Tesla has become a household name, and their continued innovation promises to keep them at the forefront of the market. Their futuristic technologies and the pace at which they're rolling out new solutions makes it easy to envision a future where Tesla continues to provide value.
If you buy Tesla stocks for your baby or small child, there's a good chance that the investment will more than triple over ten years. If they hold it for 20 years, it's not illogical to forecast that the stock might more than quadruple or even increase by 8-fold. These are impressive gains, making Tesla one of the best baby stocks to buy in 2022.
Tesla Is Working Towards a Sustainable Future
Along with the potential price increase, Tesla is also a great stock for babies because of its environmental connection.
If you're having a baby or already have small children, you're probably more focused on the environment than ever. Not only do you want your child to inherit good financial skills, but you also want them to inherit a safe planet. Tesla is one of the few large publicly traded companies that are playing an active part in sustainable energy production and decreased carbon emissions.
Mcdonalds (MCD)
Does your little one love Micky D's? If so, this is one of those stocks for babies that are they're likely to relate to right through their childhood and young adulthood.
Founded in 1940, McDonald's is one of the few old companies that are still achieving high levels of growth. For example, amid the 2020 pandemic-spurred recession, McDonald's still managed to open 500 new locations.
Admittedly, McDonald's has had some rocky periods over the last few years. As consumers become increasingly aware of the dangers of processed foods, the Golden Arches brand has had to innovate to stay in the game.
This it has done, and through some ups and downs, McDonald's shares have doubled in value over the last five years. Currently, McDonald's share prices are around $340.
It's hard to say for certain what the future value will be, but it's not crazy to foresee that the McDonald's brand is likely to be around for many years to come.
The fast-food giant has become a part of modern culture and is loved all over the world. Because of this, we'd hazard an estimate that McDonald's stocks are likely to both retain their value and appreciate. By the time your child graduates high school, their McDonald's share might well be worth a few thousand dollars per share.
Amazon (AMZN)
Amazon is a part of just about every Canadian family's life at this point. Not only do Amazon stocks have a decent potential for growth, but they are also something your child will be able to relate to.
Once they start earning pocket money, they're probably going to become an Amazon customer themselves at some point. Being able to say to your friends as a kid "I own shares in Amazon" also has a very nice ring to it!
Currently Amazon stock is trading at $4,383. Five years ago it was trading between $640 and $960. As far as short-term trading goes Amazon is currently a "buy now" stock.
However, it also holds great potential for long-term growth.
If you look at the fundamentals, it's unlikely that Amazon is going away anytime soon. Currently, Amazon dominates around 40% of the commercial market in North America.
E-commerce shopping is likely to only but increase over the next couple of decades, becoming more refined and even more convenient for consumers. As this happens, it's very likely that the e-commerce market will grow steadily, and Amazon along with it.
Besides dominating e-commerce sales, Amazon is also a top player in digital streaming, cloud computing, and AI.
Apple (AAPL)
When it comes to stocks for babies that have a solid company behind them, Apple is another top choice. Over the years, Apple has developed almost a cult-like following. Their products are usually top-quality and their smartphones have developed a strong reputation as some of the best on the market.
Chances are when your little one gets older they might own Apple products or use Apple services such as AR.
Right now, Apple stocks are worth around $225 and have increased more than 600% over the last 5 years.
A lot of experts are very optimistic about Apple's future price levels. Not only are their products an integral part of modern-day life, but they are also busy expanding their range of services and their AR technology. Because of this, it's relatively safe to say that Apple stocks could easily appreciate in value by 100% or more.
If you buy Apple stocks for your babies now, they could be perhaps more than double or triple by the time they're ready to go to college.
Disney (DIS)
Disney is another top choice when it comes to stocks for babies. Disney is an integral brand to most children's lives and entertainment. Besides growing up on Disney movies, most kids' dream is also to visit a Disney Park.
Owning shares in Disney is probably going to be far more meaningful to your child than almost any other stock.
Disney stocks are currently trading at $196 at the time of writing. In 2017, Disney stocks traded around the $128 price mark. Since then they have enjoyed a 50% rise in value.
This is a decent level of appreciation, especially for such an old, established, and stable company.
Over the next year, Disney stocks are expected to appreciate by at least 28%. Over the long-term outlook, Disney is expected to remain a blue-chip stock, thanks to their inroads into the streaming market.
Because of this, we'd hazard a guess that Disney's stock price should increase by a few hundred percent by the time your child reaches adulthood.
How to Buy Stocks for Babies
If you're wondering how to buy stocks for babies, there are two main ways to choose from.
If you already have a stock trading account, you can simply buy your child's stocks with this and combine them with your existing stocks. However, this approach can get a little messy.
Over time it can be hard to accurately work out what portion of the stocks are yours and which are your child's.
Therefore, a better approach is to open a custodial account. A custodial account will be owned by the child, but you will retain control over it until they reach the age of 18 or 21.
One of the advantages of this approach is that any gains will be taxed at the child's tax rate, not at your own. It also gives the child an increased sense of ownership as the account is truly theirs.
Takeaway
Buying stocks for babies is a great way to set a child up for financial success and give them a head start. It can help instill valuable financial and investing skills, and work towards guaranteeing a bright financial future for them.
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