First Stocks for Kids

If you're like many stock market investors, you wish you had begun investing earlier. Much earlier. If you began in your 30s, for example, as I did, you may occasionally ponder how much your money might have grown over an additional decade. But what's done is done. Even if you began in your 50s, at least you did begin, and you probably have several decades of wealth-growing ahead of you.

One thing you can do now is get some kids started in investing. Your own kids, for example, or some other urchins you love. The Fool's co-founders, brothers David and Tom Gardner, have explained how they grew up learning about stocks. It has certainly served them well.

On our Investing Beginners discussion board, someone recently asked which stocks would be good candidates for young investors. A bunch of good responses were offered:

Bighairymike said: "This is a great idea. I wish I had been introduced to investing at such a tender young age. Since this is an educational exercise, I would aim for several stocks, even if only one share, in order to see some companies up, others down, observe balance and diversification. Another idea is to pick companies they have heard of, e.g. Coca-Cola (NYSE: KO  ) , instead of something esoteric. Also, one that pays a dividend would be useful to their education. Way to go...." (For a long list of dividend payers we've recommended, grab a free trial of our Income Investor newsletter.)

Imaginos1888 suggested Disney (NYSE: DIS  ) stock as a good possibility for young ones. This is a classic option. Get the shares in your name or your child's own name instead of street name, and you'll receive a beautiful certificate suitable for framing. (Buy the shares from your own broker, get a frame at Wal-Mart, and you can save some money.) Longtime Fool contributor Rick Aristotle Munarriz is a big fan of the company and writes about it often -- if you're interested, read his "Disney's Golden Opportunity" or W. D. Crotty's "It's Getting Goofy at Disney." You may also want to read a Fool Radio interview with the author of the book Disney Wars.

bogwan suggested getting the kids themselves involved in selecting a stock: "Ask them which industries they think will do the best. Then choose a few of those. You might also try ADRs (American Depositary Receipts) [of companies based in] their favorite countries."

Fuskie asked some important questions: "How old are the kids? What are they interested in? The first rule of investing is to invest in what you know, so I would ask each of them to come up with a list of public companies that they think have potential from their perspective. Then begin researching them. It will be a lot of work (mostly yours), but they will learn from the process." Fuskie added that his own first stock was Borland Software (Nasdaq: BORL  ) because he taught himself the computer programming language Pascal in high school.

NechesInvst added: "Right on, Fuskie! Have the kids make a fairly long list of some of their favorite items, or places. McDonald's (NYSE: MCD  ) , Coke or PepsiCo (NYSE: PEP  ) , computer games, places to shop, favorite restaurants.... Looks like I'll need to start my lil' one on something like this soon...."

That's just a tiny taste of what you'll find in our vast (and friendly!) online community. Try it for free for 30 days and see for yourself.

Some more stocks for kids
There are lots of other great stocks in which young ones might invest. Take a trip to the supermarket, for example, and you'll run across many of their favorite foods, many made by solid companies. Lucky Charms fans might invest in General Mills (NYSE: GIS  ) -- which also owns the Betty Crocker, Pillsbury, Green Giant, Häagen-Dazs, and Old El Paso brands, among many others.

Another option is to look at what your kids wear. Public companies that they may be fans of and may enjoy following include Nike (NYSE: NKE  ) , Abercrombie & Fitch (NYSE: ANF  ) , and Motley Fool Stock Advisor selection The Gap (NYSE: GPS  ) . For more insights, read Jeremy MacNealy's "Fashion Face-Off: Cool Rules." When it comes to fashion trends, your young ones are likely much savvier than you are, and have some major edges in evaluating companies as possible investments. Help them understand the many advantages they have as young investors -- such as the power of time and insights into the youth market.

How kids can invest
This article, "Start Investing," explains how teens (and adults) can get started investing via brokerage accounts and other methods. It offers a link to our Brokerage Glossary, which explains many of those terms you may have wondered about, but have been too embarrassed to ask -- such as "limit order" and "margin."

Remember that your kids are likely minors. That means they aren't allowed to enter into a binding contract, so they'll need the help of a parent, guardian, or other adult to open accounts at financial institutions. An account that's opened by a minor and an adult is often called a "custodial" account.

There are alternatives to getting kids accounts of their own. They might informally buy into various stocks or mutual funds through you. For example, if you're buying 50 shares of stock in PepsiCo for yourself, you might include two shares for your daughter, informally designating them as hers and keeping good records of who owns what. Learn all about brokerages and find one that's right for you and your needs in our Broker Center.

Resources for kids
If your kids are teens or clever pre-teens, you may want to point them to our Teens and Their Money nook, which is full of easy-to-read guidance on making money, managing money and investing money. Our book, The Motley Fool Investment Guide for Teens, may also be of interest -- check out its reviews on Amazon.com.

Here are some additional articles related to kids and money:

Coca-Cola is a selection of theMotley Fool Inside Valuenewsletter service.

Selena Maranjian's favorite discussion boards includeBook Club, The Eclectic Library, andCard & Board Games. She owns shares of Coca-Cola and PepsiCo. For more about Selena, viewher bio and her profile. You might also be interested in these books she has written or co-written:The Motley Fool Money GuideandThe Motley Fool Investment Guide for Teens. The Motley Fool is Fools writing for Fools.


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  • Report this Comment On April 26, 2011, at 12:04 PM, andys2i wrote:

    Great post and some nice stock ideas here. As discussed here, http://www.savingtoinvest.com/2008/10/teaching-kids-about-st... , it is critical to start early.If your kids are interested in money, shares and investing. If you show interest they will too. Make sure you play this imaginary stock market game with them because not only can you learn new things, but having some competition is a great motivator for kids.

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