Personal Finance Q & A

Sharing Stock With Your Grandkids

Q I'm a grandparent and want to give stock shares as birthday and Christmas gifts. What's the best way?

- B.V. (e-mail)

A "Transaction costs can be so expensive that I wouldn't buy one share of an individual stock, I'd buy at least 10 shares," says Peggy Farley, president of Ascent Asset Management in New York.

She suggests you consider "buying firms that children are familiar with," such as Walt Disney, Coca-Cola, or PepsiCo.

"Be sure you use a discount broker for small purchases," Ms. Farley says. Take Disney: At about $118 a share, 10 shares including transaction fees would be $1,213.30 if bought through discount firm Jack White & Co. (800-233-3411), or $1,235.15 if bought through Charles Schwab & Co. (800-540-8117). Commissions total $33.30 at White, $50.15 at Schwab. The shares could be held in your name or as a custodial account in child's name, with you as custodian. If the shares are mailed directly to the child (as stock certificates), there may be an added fee. Schwab charges $15. White has no charge.

You could avoid brokerage commissions by buying through direct stock purchase plans offered by some companies, but they can be complicated and have some fees.

Q What do you think about a reverse mortgage?

- Name withheld, New York City

A Reverse mortgages are well-suited for older people who may be "home rich, cash poor," says Forrest Pafenberg, director of real estate finance at the National Association of Realtors in Washington.

Like a home-equity loan, a reverse mortgage is a loan to you take out against the equity in your home. But in a typical reverse mortgage, the borrowed amount plus interest is deducted from the equity when the homeowner sells the home or dies. Sometimes lenders require repayment after a certain number of years.

"You can use a reverse mortgage to get a big chunk of change," all at once or over time, Mr. Pafenberg says. To qualify, you usually must own your home outright and be in your 50s or older. "The amount you'll get is determined by actuarial tables," he says. Transaction costs can be high.

The American Association of Retired Persons has a free book on the subject, "Home Made Money." Call (202) 434-2277.

Questions about finances? Write:

Guy Halverson

The Christian Science Monitor

500 Fifth Ave., Suite 1845

New York, NY 10110

E-mail: halversong@csps.com