Investing for the youngest generation.
During Black Friday, countless children watched their parents very, very carefully, trying to catch a glimpse of the booty they’ve stashed in the car trunk. But given that today’s perfect gifts are tomorrow’s perfect garage sale fodder, doesn’t it make sense to think about what else your kids are watching you do? To wit: You’re demonstrating how to spend money when you could show them how to make money instead. Not even Santa and his elves have an inside track to that kind of racket. So now’s your chance to start teaching them that while money doesn’t grow on Christmas trees, capital gains are the gift that keeps on giving.
Don’t tell them how stocks work, show them.
Vic Patel, founder of the Forex Training Group, has turned stock picking into a bonding ritual with his teenage daughter. “We sit down every few weeks and collaborate on which stocks we feel will make a move in the near future,” he says. “It’s a great way to get her involved and interested in the markets and investing in general.” It’s also a tantalizing incentive for competitive young adults to school their expert parents.
Game the market.
You can start younger children off by giving them a play-money portfolio and tracking the results. “Make it fun by making it a game at first,” says Rebecca Pavese, a financial planner and portfolio manager with Palisades Hudson Financial Group’s Atlanta office. Pavese, who’s also a mom, advises using online competition tools and/or create and track investments together. “Playing through the simulations first will allow you to spend time with your child and open dialogue about the rules of investing,” she says.
Watch Warren Buffett’s “Secret Millionaires Club.”
There’s no treehouse involved here though Buffett, who helped create this video series, could buy a dozen national forests. The 26 episodes, available on the Kid Genius channel via Xfinity on Demand, star an animated Oracle of Omaha, who mentors the characters (and a robot) in ways of financial and business wisdom. Short webisodes air on smckids.com, and the series also guest stars the likes of Bill Gates, Jay-Z and Kelly Rowland. OK, so it’s a secret club — but how do adults join?
Demonstrate patience in action.
As any value investor knows, success equals delayed gratification. Consider a project where results unfold over years, says Dave Geibel, senior vice president and wealth advisor at Girard Partners in King of Prussia, Pennsylvania. “Starting to invest at a young age allows a child to witness growth and experience the common ups and downs of the market,” he says. Geibel also notes: “Volatility is normal. Knowing and investing through it will keep emotions in check when investing at an older age.” Children. Emotions in check. Imagine that.
Buy a 10 pack.
Robert Johnson, president and CEO of the American College of Financial Services in the Philadelphia area, suggests parents give children a portfolio of about 10 stocks. “Pick one share each and have some be dividend payers, some not,” he says. Better yet, “make them companies kids understand: Walt Disney Co. (ticker: DIS), Coca-Cola Co. (KO), Nike (NKE). It will give them an appreciation for compounding, yield and the fact that some wonderful companies aren’t necessarily great investments.” True, losing could hurt — but it’s your money, right Santa?
Pound home compound interest.
When children rake in the bucks from relatives this holiday, resist the temptation to set them loose in the mall. To them, compound interest may seem like a trick — but in this case, the magic is real. “I stress to my kids the value of saving their money, which means all that loose change and cash gifts,” Patel says. When there’s a big enough pile, take it to an interest-bearing account where they can watch it grow long after the mistletoe turns to compost.
Don’t forget giving.
Legendary investors like Buffett believe deeply in giving — and not as an afterthought. “We started with our kids once they were old enough to put the offering in the plate at our church,” says Daryl Dagit, financial advisor and market manager at Savant Capital Management’s office in Peoria, Illinois. “And once they started receiving cash gifts for birthdays and doing extra chores around the house, they were taught to put some in the bank, give some to Sunday school and that it was OK to spend the rest.”
Pass on your parents’ gifts.
Marguerita Cheng, CEO of Blue Ocean Global Wealth, has experience aplenty taking her daughters holiday shopping. But she’ll also pass on the financial gifts her father gave her. “Parents can have kids invest in stocks via a dividend reinvestment plan,” Cheng says. “I distinctly recall my dad discussing the price of IBM (IBM) stock and how he purchased it via payroll deduction. In fact, this is exactly how I learned to read Value Line [an investment survey] — and how Dad helped me pay for college.”
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