It might be too late to get your kids into that prestigious kindergarten, but you can still give them a great edge in life by introducing them to investing when they're young. With time on their side, they're positioned to reap the greatest benefit from the magic of compounded growth.
Before plunking actual money into stocks, though, play and experiment together. Here are some suggested activities:
1. Build a mock portfolio. Have your kids make a list of companies that interest them. At home, in their classrooms, at the mall, and on TV, they'll find ideas such as Nike (NYSE: NKE ) , Disney (NYSE: DIS ) , Ford (NYSE: F ) , PepsiCo (NYSE: PEP ) , Abercrombie & Fitch (NYSE: ANF ) , AppleComputer (Nasdaq: AAPL ) , McDonald's (NYSE: MCD ) , and more. Have them list five to 20 companies on a sheet of paper, with ticker symbols, current stock prices, and today's date. Every day or week, have them record the latest prices. Calculate the gains or losses regularly. Such short-term stock price movements aren't terribly meaningful, but they can help a child understand how the market works. (You can create an online portfolio to make tracking the stocks easier at sites such as Yahoo! Finance.)
2. Follow the companies together. Scan newspapers and magazines for stories about the businesses. If McDonald's is promoting 55-cent burgers, watch to see whether this will be a good move that brings in more sales, or a bad one that decreases total profits. Note how news affects stock prices.
3. Eventually, help your child actually invest money. You can open a joint brokerage account, with you acting as custodian. Or informally "sell" some of your own shares to your child. If you own some shares of PepsiCo, for example, you can "sell" two shares to your child at its current price. If you're about to buy 100 shares of ExxonMobil and your child wants to buy a share or two, you can buy 101 or 102 shares. (Yes, really. You don't have to buy in "round lots" of 100.) Your kid can also open his or her own brokerage account at age 18, and you can transfer shares into it.
Get your kids started learning about investing today, and they might end up helping pay for their own college tuition. Appreciating its dollar value might inspire them to read a few more books and attend a few less all-night parties in their freshman year, too!
To get your kids interested in saving and investing their money (and perhaps to ensure that you'll be treated to a first-class nursing home one day), invite them to drop by our online area for teens.
Also, consider giving them a copy of our well-regarded book, The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of.