A brokerage statement isn't as cute as a pair of baby booties, but the bragging rights are better.
Invested wisely, those $10 birthday checks can turn into a pile of money over the years, especially if your child is decades away from retirement. Even late starters -- your 18-year-old, for example -- have plenty of time to amass a fortune. If she saves just $500 a year and finds a few great investments that bring her an annual average return of about 9% (the historical average return for the S&P 500), she'll have nearly $250,000 by the time she's 61.
We asked savvy parents how they picked baby's first investments, and here's what they said:
- Look at the products you use for baby. Take a look at the company behind the formula you feed your bundle of joy and the care products you use. Many of those companies -- like Nestle, Bristol-Myers Squibb (NYSE: BMY ) , or Pampers maker Procter & Gamble (NYSE: PG ) -- are publicly traded.
- Pick companies you've heard of and whose products kids use, like Coca-Cola (NYSE: KO ) or Disney (NYSE: DIS ) -- even if you can afford only a share or two of each.
- When your kids are old enough, ask them to get involved in picking companies. (Got any Barbies or American Girl dolls lying around the living room? We've been watching the girl-fight at their maker, Mattel (NYSE: MAT ) , with amusement.)
- Go ahead and give in to peer pressure -- the good kind, that is. Here's some investing advice from teens, to other teens.
After you're done with Junior's laundry and grounding him for not taking out the trash, set up an account for your kid (here's how) and start stock shopping. And when he buys his first ride -- with cash -- suggest the vanity license plate "THXMOM."
Coca-Cola and Mattel are Motley Fool Inside Value recommendations. For more about our newsletter about unloved stocks, click here.