NEW YORK (CNN/Money) - I'm a single grandmother of two wonderful grandchildren. In order to encourage them to save for the future, I'm thinking of purchasing a small amount of good stock that will grow over the years. Are there are any accounts out there that allow you to buy small amounts of stock without paying a fortune in brokers fees? I don't have a lot of money to invest, but want to do something besides buying them a dumb toy they will be tired of next week.

-- M.J. Holland, Palm Coast, Florida

I admire your intentions, Grandma, but I'm not sure you're going about this the right. If you want them to have a little nest egg for the future, then your plan of investing some money for them now makes perfect sense.

But I'm not sure that an outright gift of money will do much to encourage them to save on their own. I mean, it's possible the lesson they take from this could be that they don't have to do much saving because kindly relatives like yourself will do it for them.

So here's what I recommend. Tell your grandkids that you'd like to demonstrate in a practical way the benefits of regular savings and show them how a series of small investments over time can add up to big bucks down the road.

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Then make this proposal to them: tell them that for every dollar (or $10 or $100, depending on their situation) they save, you'll match their savings with money of your own at some specific rate -- two bucks for every one they save, three bucks, ten bucks, whatever. You can do this until they've hit some maximum amount you wish to give them, or until you no longer feel you can afford this magnanimous gesture.

By going about your plan this way, you not only give them a head start on accumulating an investment fund, you also encourage them to save on their own in order to take advantage of your largesse. It's essentially the same principle employers use with matching funds in 401(k)s.

If your grandchildren are too young to save, you could put something away for them without telling them about it and then begin doling out this money to them along the lines I've described above.

In terms of actual investments and accounts, there are any number of ways you can pull this off. If you really want to buy individual stocks, you can look into DRIPs (Dividend Re-investment Plans), which allow you to buy small numbers of shares on a regular basis and reinvest the dividends, usually at a low cost. (Be careful, though, not all DRIPs are a bargain. For more on DRIPs and how they work, click here.

Frankly, though, I think you would be better off investing the money in a diversified mutual fund. That relieves you of the chore of deciding which stocks you ought to buy and it also prevents a problem with one stock (think Enron or any individual shares that have had major meltdowns) from decimating your progenies' portfolios. You can screen for funds with good track records, low expenses and low minimum initial investments by going to our Fund Screener.

As to what type of account or accounts to use, I think you would want to have an account with the child's name on it to give him or her a stake in the progress of the account.

One way to do that is to open an account such as a UGMA (Uniform Gift to Minors Account) or UTMA (Uniform Transfers to Minors Account) in the child's name with you as custodian. This way you control the account. Be aware, however, that once the child becomes an adult -- which occurs legally, if not emotionally, at age 21 in most states and at 18 in a few others -- the money in the account is the child's.

If you're concerned your "wonderful" grandchildren might be inclined to blow their savings on something frivolous -- say, a 10-million-watt video-CD-DVD-home entertainment system -- you might consider opening a 529 college savings plan.

With a 529 plan, you name a grandchild as beneficiary, but you would retain control of the account. To get the full tax benefit of the account, the money must be used for college education expenses for the beneficiary. Nonetheless, you do have the right to change the beneficiary to another qualifying family member or even simply withdraw the money and use it however you choose, although you would incur some tax penalties. For more on 529 plans vs. UGMAs click here.

Ultimately, I think the most important thing is come up with a plan that shows them that the most important key to financial success isn't the kindness of relatives, but saving and investing on a regular basis. Let's hope they take to the lesson.

Walter Updegrave is a senior editor at MONEY Magazine and is the author of "Investing for the Financially Challenged."