Fool.com: A Fool Is Born? [Fribble] April 3, 2000

Fribble A Fool Is Born?

By BillWorth
April 3, 2000

This weekend I was walking in the park with my son, who's nearly 8 years old. The day before he'd been to a birthday party at a horse stable, and he got to ride a horse for the very first time. So I wasn't surprised when he asked, "Dad, can I get a horse?"

I explained that horses were quite expensive -- much more than the fish he has swimming in the tank in his room, and that since we live on an expansive one-fifth of an acre, we'd also need to pay for boarding the horse at a stable.

"But Dad, I can save my allowance, can't I?"

He was crestfallen when I informed him he'd have to save his allowance for about 100 years to have enough to buy a horse. That is, if he saved it where he usually does, in his Pokemon wallet.

"But you will someday have a job," I said, "and make more money than what you get now for allowance. And there are ways of saving money that are better than others."

I then proceeded to explain to him the concept of a savings account at a bank. Safe investment, no risk, as his $10 is backed up by the Federal Government, and without doing ANYTHING he'd have $10.30 at the end of one year. Pretty good, and enough to buy an extra piece of bubble gum. And if he kept saving $10 a year in that savings account, in 20 years he might have $300. (I didn't do the calculations that exactly -- we were in the park!) He liked it, but correctly reasoned it might still be a long time before he owned a horse.

I then explained that he could buy a piece of a company he liked, called a share, and rather than having $10.30 at the end of the year, he might have $12 if the company did well. And that the more he added to it, as time went by (in say 20 years), he might have a couple thousand dollars that might be enough to buy a horse (OK, I don't really know how much horses cost, so I might be way off here). I said that there was no guarantee, but if it was a good company, the longer he held that piece, the more likely it was to do well. At this point, however, my son forgot about horses.

"You mean, I could own a piece of any company I wanted?"

"Well, yes," I replied. Now he was REALLY excited. We started talking about McDonald's, and Gap, and Home Depot, and Disney, and he thought this was the best thing he'd heard in ages.

So, as soon as he's accumulated $20 for allowance (he already has a $5 bonus for not fighting with his little sister all weekend) we'll go on over to BuyandHold.com (since all you need is $20) and open an account for my son to start investing. He really likes Pokemon, which airs on the "KidsWB" -- part of Warner Brothers, a subsidiary of Time Warner, which, since it'll be merging with AOL, is a pretty good place to start, I think.

I knew if I told him he was a Fool, he wouldn't understand. Yet.