Friday, August 7, 1998

The Junior Investor Fribble
by Selena Maranjian

"Once you bring life into the world, you must protect it. We must protect it by changing the world."
-- Elie Wiesel

After writing a piece recently, suggesting that Fools work to spread Foolishness around, I received a few encouraging e-mails from readers. For the most part, either they were eager to sign up or they explained how they had already been engaging in campaigns of their own. Consider this note from a Fool named Everett (

I own a campground and employ many summer high school students. I am amazed at their lack of knowledge concerning money, credit, stocks... Last summer I talked to one high school girl about the benefits of Dividend Reinvestment Plan (DRP) investing and we discussed several companies. She bought one share of Intel towards the end of the summer, after I showed her the benefits of compounding. After the other girls spent their money on things like stylish clothes, which quickly went out of style, the group opinion for this summer is that they all want to open DRP accounts. They like the idea of being able to buy a home when they turn 30 years old. Oh, and that one girl's parents... Now they want to start a DRP account, as well.

What a great note. Everett gave a little time and energy to others, explaining some important Foolish concepts like the power of compounding. And what's the end result? Already, one previously unFoolish person has taken her first modest step toward financial independence. On top of that, a bunch of others are looking on and planning to do the same themselves. This is very exciting just by itself, but consider the effect years down the road.

Everett's first convert will probably continue to buy more shares of Intel (among other stocks). If the shares do as well in the next ten years as they did in the last, her first $100 investment will be worth some $2,000. Instead of having an old sweater and pair of jeans in a corner of her closet, she'll have a growing little nest egg. It's also likely that having caught the investment bug, she will have continued saving and investing over the years. Let's run some numbers.

Imagine that she's 18 and invests $500 per year through age 22. From age 23 through 29, she invests $1,000 per year. From age 30 through age 50, she'll sock away $2,500 each year. By the time she's (a still young) 50, if her investments grow at the historical market rate of 11% per year, she'll have accumulated some $339,000. (The total of her initial investments: $37,500.) If she had begun using the Dow Dividend Approach at age 30 and earned, say, 17% per year from then on, she'd end up at 50 with more than $840,000. Wow.

A few generations later, it's likely that she'll be fondly remembered by her descendents as someone who turned the family onto investing and left a considerable sum to her children and grandchildren, themselves avid investors. Her friends from camp will probably have reached similar ends. And all this because one Fool named Everett did a good deed. Imagine how many lives we can change for the better if we all reach out to a few people we know.

Everett's story had another impact on me. I was originally going to write this piece about Bavaria, odometers, horseradish and phonics, but have been inspired to write about kids, instead.

It's great that Everett reached out and helped some people. But it's even more powerful that he got the message through to kids. Young people have absolutely the most to gain from investing. We can admire the compounding clown all we want, but most of us will only see it dance for maybe four decades (still not bad, though). Kids can compound money perhaps close to twice as long. After all, who knows how long people will be living by the time today's youngsters reach their late years. $1,000 invested once and growing at 11% for 40 years will turn into an admirable $65,000. Let it sit there for another 20 years, though, and you end up with $524,000. Quite a difference. Imagine adding to the $1,000 over the years and you end up with even bigger piles of security.

We've often received mail asking if we have any materials for kids on investing. Until recently, the answer was "Sorry -- not yet." But no longer. We've recently launched a modest area targeted at teens: Young Fools: Teens & Investing. If you have any kids, or know any kids, or teach any kids, or are a kid, or plan to meet any kids, consider having them check it out. We plan to have more offerings for kids in the future, but this is our initial foray into the area.

In the Young Fools collection, we've included an introductory piece called Why Invest? that's meant to get kids' interest piqued. In addition, there are pieces on How to Grow a Million Dollars, What's Up with Banks?, Risk and Return, and Ways to Lose Your Money. We also explain the workings of stocks and describe alternative investments to stocks, such as bonds, bank accounts, CDs, and so on.

And in case you weren't already aware of this, we've also got a growing collection of articles aimed at helping parents talk to kids about money: The Family Fool.

Before I fall deeper into a promotional stupor, I'll close with some interesting quotations about children:

"All God's children are not beautiful.
Most of God's children are, in fact,
barely presentable."
-- Fran Lebowitz

"She discovered with great delight that
one does not love one's children just
because they are one's children but
because of the friendship formed while
raising them."
-- Gabriel Garc�a M�rquez

"What the vast majority of American children
needs is to stop being pampered, stop
being indulged, stop being chauffeured,
stop being catered to. In the final analysis
it is not what you do for your children but
what you have taught them to do for themselves
that will make them successful human beings."
-- Ann Landers

"Nothing you do for children is ever wasted.
They seem not to notice us, hovering, averting
our eyes, and they seldom offer thanks, but
what we do for them is never wasted."
-- Garrison Keillor

Fool on!

(This Fribble first appeared as a Fool Portfolio report on 4/6/98)

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