Or at least we’re guessing I was about 5, because the original papers haven’t turned up yet. Seriously though, i can thank my parents for buying me 25 shares of “company” stock in an UGMA (Uniform Gifts to Minors Act) account when I was a kid. A real stock certificate was issued and the dividend reinvestment was done through a DRiP account, not at a brokerage house.
I’ve hung onto those shares, which surivied the Financial Crisis of 2009, and the shares have compounded themselves about 18 times thanks to DRiP, mergers, and slips.
Unless you’ve stumbled into a time machine, clearly you can’t go back and do this for yourself. Pontentially this may be interesting to start off the next generation.
What is an “Uniform Gifts to Minors Act” Account?
The UGMA is an act that allows minors to own property including stock security. Check with the IRS for more information related to taxes both when creating the account (there potentially is not any), and the annual income taxes for the kids.
It was the biggest joke when I was a kid that my parents had to file my annual tax return separately. It feels like I’ve been filing separate return for as long as I can remember.
One hiccup we ran into with the UGMA account
My father suddenly passed away about 2 weeks before a dividend payment. I was almost 25 at the time, but somehow I remembered in the mix of the chaos that I had a dividend check coming. Because of a merger, the account would no longer reinvest the quarterly dividends and we hadn’t gotten around to figuring out how to move the account. My father would write of the check to me, maybe $100 per quarter at the time.
Needless to say I was on the phone with their customer service trying to get the check fixed before it was cut. It was probably in the top 10 of oddest conversations I’ve ever had to start. They wanted an original copy death certificate to change the account. I kept arguing that a) I didn’t have an extra original cert to provide and b) the account was more than 18 years old so clearly I was a minor anymore. Ultimately we got the issue settled and the account was de-UGMA’ed. The check arrived in my name only (actually a sad moment).
But lesson here is to make sure the account is maintained properly once the minor is no longer a minor. State laws may determine when accoount custodianship is changed. Regardless, save the headache in the moment of stress and fix it upfront.
One other thing to remember if you do dividend reinvestment for decades for the same stock
I have no idea the cost basis for about 200 shares that accumulated in the DRiP account, and I transferred several times before the IRS changed the reporting rules. At some point I’ll find the paperwork, but with a merger also in the mix I have shares with no cost information. Fortunately now all the shares are at least consolidated into one account so I can reinvest fewer separate tax lots.
So while I haven’t always been thinking dividend first, getting started early has turned out well. Could I have made more money in a different stock? Likely. Could I have made less money (or lost money)? Yup. 20/20 hindsight in interesting for learning and restrategizing for the future, but not worth the effort for driving yourself insane with what-if or only-if-I-had benchmarking.