Several years ago, I ran across a Motley Fool column outlining a plan to turn the writer's newborn niece into a millionaire by the time she turned 52. I thought that was a neat idea and decided to start something similar for my baby nephew and, later, my niece. I set up a pair of accounts under the Uniform Gifts to Minors Act and put some money into them; now I add $200 to each twice a year, investing in Vanguard's S&P 500 index fund. The deal is as long as they don't touch the money, I'll continue contributing, but the moment they touch it, the contributions stop. (Plus, they don't get any other presents from us, like toys -- believe me, they get enough already.)
One reason I'm doing this is that I had a great uncle who did something similar for me when I was born. For every ounce I weighed, he invested $1 into the stock market, and when I turned 18, he cashed out and sent me the total (rounded up slightly to an even $1,000). Nobody in my family knew about this, so imagine the surprise when that check showed up. It was the most money I had ever seen.
Another reason is that my wife and I don't have children. If we did, I'd certainly have gotten them involved in investing at an early age. After all, one of the biggest secrets to success in the market is time in the market, letting compounding growth work as long as possible.
My colleague Jason Moser (a.k.a. TMFJMo) and his wife started by teaching their daughters about saving money. About two years ago, during a visit to Panera Bread (NASDAQ: PNRA ) , he mentioned to them that he owned a small portion of that restaurant chain, so visiting it was helping out the company and himself. That opened up the idea that investing was something you could do with some of your savings. Since then, the Moser girls have become part owners of several companies, including Apple (NASDAQ: AAPL ) and Nike (NYSE: NKE ) . Watch this video to see Jason talk with his daughters about it.
If you've ever thought about passing your Foolish investing habits on to the next generation but wished you had an idea or two on how to do it, I hope I've shown you that it doesn't have to be complicated.
1, 2, 3, go
On the Motley Fool Stock Advisor community discussion board, I asked if our members' kids were investing and how they got started. Many Fools chimed in, and I gleaned seven tips they shared. (Accessing the link requires a subscription.)
1. Start them without their knowledge. Just begin before they're old enough to ask about it! CromulentBrad 's parents did this, buying shares of several companies they related to when he was little. Later, when he found out, it was exciting to see his holdings grow bigger almost automatically. He's planning to do the same thing for his 19-month old daughter.
2. Capitalize on their interests. Many of you talked about using what your children already like as a path into investing. Clothing, toys, and television can all act as gateways, as Fools like eagle79jmw pointed out. Under Armour (NYSE: UA ) with its clothes and strong athletic brand, Hasbro (NASDAQ: HAS ) with its toys and games, and Netflix (NASDAQ: NFLX ) -- watching cartoons will never be the same -- all work here. But would you consider Canadian National Railway (NYSE: CNI ) or Boeing (NYSE: BA ) ? These companies make or use the real-life versions of toys, as bellpa pointed out. Plus, this is an approach that young investors can make their own, said cautiousone100.
3. Put sibling rivalry to work. Seeing an older sibling's investments reaping windfalls can get younger children to lobby for their own portfolios. This worked for ldigout, among others.
4. Appeal to greed. Hey, it's a powerful motivator! And as an argument in favor of dividends, kids should love the idea that those big companies will pay them to own shares, bz5101 said.
5. Do your investing in front of them. Kids pay attention to what their parents are doing, even when we don't realize it. Oley68 found that out when his daughter asked to open her own investing account, after she observed him doing his research. Something similar happened to mbivy, and JKnight19 will be trying this, too.
6. Pass on the lessons of your parents. JBGmoney has fond memories of his dad helping him follow their Texas Instruments (NASDAQ: TXN ) shares in the newspaper. Today, he's indoctrinating his young children into the world of investing, but probably with the Internet. So is davetheDINK, passing on a family tradition of investing for the long term.
7. And don't forget the rest of life. It's true, there's more to life than investing. Education, self-reliance, hard work, and kindness pay dividends, too, as mazske pointed out.
What it means for you
Parents, aunts and uncles, other responsible adults -- we have huge influence over children, and we have many ways to get them interested in saving and investing. They may not live and breathe it the way we Fools do, but even getting them into some index funds today will pay off when they're older. So go ahead and start today.
This article was originally published as a "Fool's Tools" piece in a previous issue of Stock Advisor.
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