I recently wrote an article on children and their weekly allowance and mistakenly felt that a 12 year old was much too young to even think about investing in the stock market. Shows you how much I know! The more research I did, the more I learned that many financial experts feel that the tender age of 10-12 is the perfect time for kids to learn about the stock market. In the process of sitting down with my daughter I learned quite a bit myself. All things considered — the initial outlay of investing in the stock market isn’t that much more than any other type. In fact, once my daughter and I sat down and looked at her allowance and some other monetary gifts she’s received from parents and relatives it was easy to see that see could make the leap from buying comic books to buying stock options. My daughter may not grow up to be Donald Trump, but she sure has eclipsed anything I was able to accomplish at her age!
So this is what worked for me — maybe there’s something here that will be beneficial to you and you’re child as well!
There’s a lot of information out there and more than a good portion of it is presented in an easy-to-digest manner for youngsters. Stocks — according to www.investopedia.com represent variable risk, variable return investments. On the whole, they are categorized as high risk and high return. You have to make it clear that all the risks involved in the stock markets can’t be predicted, but even so, the stock market is a strong investment because, over time, the market has seen a general rise. Investopedia.com has a lot of good information no matter what age you are, and is a good foundation to start with.
But the objective here is your children and they are the ones who need to understand how the stock market works. Otherwise, you are doing all the work while they are reaping the benefits. There are some premier sites on the internet that teach all about the stock market via fun and games. Here are a few of my favorites. I’m not sure who learned more — me or my daughter:
– Money Games (www.younginvestor.com) An animated website for some simple money games and a way to get warmed up for a stock market simulation game.
– BuyLo $ellHi Game The multimedia elements on this website are way cool. Kids start with 5,000 virtual dollars. The have 12 months to invest that money in the Buy-lo stock market. They search for clues in the news, follow the market, play some hunches, and make their money grow as much as they can.
– Virtual Stock Exchange The Web’s Largest Independent Stock Market Simulation. May be more suited for older children – but never forget; our kids are smarter than we often give them credit.
-The Stock Market Game The premier educational program that teaches the fundamentals about economics and finance. This 20 year program is primarily used by students in grades 4 through 12 and others who want to learn more about investing and managing their financial future. The Stock Market Game enables participants to discover the risks and rewards involved in decision-making, the sources and uses of capital, and other related economic concepts. Gain knowledge without the risks.
– InvestSmart Stock Game An excellent website to learn the fundamentals of trading stocks. Participants start out with 100,000 virtual dollars in their cash account. Game players can take the Stock Market Basics course offered and learn the techniques to research companies in order to decide which stocks they want to buy or sell. Participants can sign up for the game more than once with different login names and trade different stocks in each account to test out various investing strategies.
So you and your youngin’s have learned a little background…played some games…had some fun and now it’s time to dive into the shark-infested waters of the stock market. When your kids are ready to invest, instead of paying brokerage fees, look for companies that sell shares directly to the public with little or no transaction fee better known as dividend reinvestment plans or DRIPs. DRIPs are offered by about 1100 U.S. corporations and provide an excellent opportunity for anyone (not just kids) to amass a sizable investment portfolio without spending lot of money. With DRIPs your dividends are reinvested in additional shares of stock in the company instead of being paid in cash. Doug Gerlach’s site www.dripcentral.com has everything you could ever want to know abut getting started with that first investment and all the ones that will follow. Another good site is www.stock1.com. DRIPs allow you to invest monthly or bi-monthly and the costs are so low that it won’t wipe out a youngsters allowance. The keyword here is consistency. The money goes in…and stays in…and keeps building on itself. When your child is older than you can look at cashing in shares.
Experts recommend that children invest in what they know — which makes companies like McDonalds and PepsiCo favorites with youngsters. Certainly these are the only names out there but their long-tern potential has proved to be solid. Kids should do their research and if they play any of the games listed above they’ll already know how important it is to be an educated consumer (or better yet — investor).
My daughter has picked a few stocks from companies she recognizes and feels comfortable with. What I feel isn’t important. She’s done her research and made her decisions. She is committed to a consistent investment strategy. I’ll write a follow-up article in about 15 years and let you know how she did!
The whole investment game isn’t as complicated as it seems. Get involved with your kids and get them excited about saving. It doesn’t take much and can be the beginning of a nest egg for the future!