How to Turn Your Kids Into Stock Investors

For a lifetime of good investing habits and wealth building, start them young.

Motley Fool Staff
Motley Fool Staff
Jan 7, 2019 at 11:09AM
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One of our core goals at The Motley Fool is to help people become great investors, and the earlier a person starts on that path, the better his or her long-term results are likely to be. That's why we consider it a smart move to get your children -- or any younger relatives -- involved in stock picking while they're still children.

To that end, in this Rule Breaker Investing podcast, David Gardner has gathered a whole panel of Fools to discuss the best ways for folks to get started. Gardner, Naima Barnes, Daniel Messeca, Robert Brokamp, and Jason Moser will offer up tips, advice, and a host of personal anecdotes about how they guided their kids into the world of Wall Street, and how they were led into it themselves.

A full transcript follows the video.

This video was recorded on Jan. 2, 2019.

David Gardner: I can't think of a better way to start the new year than surrounded by friends, talking about something fun and, ultimately even more so important, and then sharing it out.

At what age did you start investing? There's no right answer. We all have a different story to tell, but at what age did you start investing? And no matter what age you did, you now have an opportunity to start someone else out even earlier and even better.

But how? Do you feel equipped? Well, that's what we're here for. Get your kids started investing to start the new year with Rule Breaker Investing.

And welcome back to Rule Breaker Investing! Happy New Year! What a delight it is to have you join us. This is the second straight podcast -- this is a new record for this podcast -- where we've had no sponsor, and I guess the implication is sponsors aren't showing up because they think people won't listen to podcasts on Christmas Day or New Year's Day. It doesn't make any sense, but I'm happy to say it's made sense to you.

And because we're doing this podcast in part timelessly -- I hope many of us are hearing this podcast, even though it happens to be New Year's for 2019 -- I hope that you'll enjoy this conversation that I'm having, as I mentioned earlier, on a topic most important to us with a fun group of Fools to help you get somebody else, somebody younger than you, started investing.

I have a friend named Bernard Wright here in Washington, D.C. Bernard came up to me and he said, "Hey David, could you do a podcast on this topic?" His son is a Marine, so that's not a newborn. We're going to talk about newborns, but we're also going to talk about college grads. We're going to talk about people who are younger than us and helping trigger that person, catalyze, switch him on, and get him started investing.

That's really our focus, and I do want to throw out some credit to one of our listeners, because Robert Trapp on our mailbag two months ago said, "I now have eight grandchildren," Mr. Trapp wrote, "ranging in age from 1 to 13 years old. I want to begin teaching them about investing. I'm thinking that a good way to begin is set up a custodial account with the brokerage firm I use, which happens to be Schwab.

"What do you and your panel of Fools think? Do I make all of their individual stock holdings identical? Shall I work with the older children to help them choose their own portfolios? How do I give stocks to them? What are the tax implications of custodial accounts for minor children? Thank you for all you do in the name of Foolish learning." Signed, Robert Trapp.

I told Mr. Trapp a couple of months ago, "Darn it! We're going to start off the year 2019, timelessly going forward, with answers to those questions." Now whether we hit each of those, Mr. Trapp and my good friend Bernard; whether we hit everything that you're hoping we talk about, we probably won't. But I'll say this. I've brought a wonderful group of Fools. They'll introduce themselves as they enter into the conversation to talk about getting started investing.

So, yeah! That's the purpose of this podcast and really, in large part, that's the purpose of The Motley Fool, now in its 26th year of operation. That's why we're doing this and before I introduce my first guest, Jason Moser, I want to mention that if you enjoy this podcast, "Getting Others Started Investing," you might want to listen back to "Get Started Investing," for yourself, because we did a two-part series toward the end of last year.

The first one was on Oct. 3 of 2018, so point your iTunes player or Google Play, Spotify, or however you like to listen to Motley Fool podcasts at Rule Breaker Investing the first week of October. And then the first week of November, which was part two where we answered your questions aroused by the first podcast.

So that's a little two-part series for getting anybody started investing, but the real purpose of this conversation, Jason, is to get people younger than we are -- not just us, but others -- started investing. And I want to start with you because you've often talked about how you got your daughters started investing. Let me start because I'm hoping for a little bit of a chronological swing to this conversation. We're going to start with getting young -- like really young -- like maybe newborns started, and then get through to the Marine Corps grads of our lives.

Jason, did you start with your daughters at age zero, 1, 12? How did it start?

Jason Moser: I like that idea. Let's start with the chronology. There's no better place than when they're newborns. I still remember pretty well when my kids were born. I have two daughters, 12 and 13 years old now -- almost 14, I guess, at this point.

It all goes back to what the ultimate goal is, because even if we're talking about investing for kids, there's still a goal in mind, whatever your goal is. If we're adults and we're investing, typically that's because we want to fund our retirement. What's the goal for the child?

As soon as they were born, my wife and I were both on board with making sure we had some way to get some money saved up for them for college down the road with the understanding that that's not getting any cheaper and also understanding that time really is the investor's best friend. Our goal, in that regard, was to get a nest egg started for higher education when that times comes.

Right when they were born, David -- I think we got their Social Security numbers the next day -- I opened up 529 accounts for both girls immediately. We funded those accounts with just an initial $500 and then set it up so that every month there was an automatic deposit, a very minimal automatic deposit, that goes into each 529. It's not something that we even really feel. I know that we're very lucky that my wife and I both have jobs that can help fund that.

The point is that for every month of their lives, from this point until they reach college age, they're going to have a small monthly deposit that goes into that 529. What we've seen over the course of time of 12 and 13 years, is it's pretty amazing what just a little bit every month can do. And we talk a lot about the magic of compound annual growth and it really is magic, and the longer it goes the more magical it seems. For our purposes with newborns, the goal was to fund higher education. That's how we got them started.

Gardner: That's great, Jason. So with that goal orientation and really starting as early as possible, you got a great head start on their behalf when they were born.

It's interesting because we all have probably different approaches and that's part of what we're going to reflect. We're going to reflect some motley to what we're doing. But for us, also with kids, I just started them with custodial accounts. It wasn't toward 529. And I have to say, in some sloppy ways I'm sorry to say we never really did 529 plans in our family.

Both of these are definitely ways to save for kids and get them started investing, and I know a lot of your journey and your story, Jason, and we'll get there a little later, are what to say to kids once they're of age. The conversations we have. The culture that we create around our families. But Naima Barnes, you're part of our conversation, today. You have a deeper understanding of these kinds of types of accounts and some of the reasons behind them, so I wanted to turn to you next and just ask you to introduce yourself briefly, and then let's get some of the nuts and bolts there of how to actually get kids started investing when they're too young to even know themselves.

Naima Barnes: My name is Naima. I work in Motley Fool Wealth Management as a paraplanner. There's two main types of custodial accounts. Both came from different laws that were put in place a while ago. One is the Uniform Transfers to Minors Act, also known as the UTMA. The other is the Uniform Gift to Minors Act, also known as the UGMA.

Gardner: I think I did a UGMA -- an uhg-mah. I think I did. Sometimes people think that surely David Gardner or Tom Gardner, the co-founders of The Motley Fool, would know everything about money, but the truth is I hope Tom and I are constantly letting people know we don't know that much, and so this is something I didn't even realize. What's the difference between those two things?

Barnes: The difference is that with one of the accounts, the UGMA, if I'm not mistaken, you can include real estate. I'm looking at Bro to confirm.

Robert Brokamp: Yes. This is Robert Brokamp of the Motley Fool Answers podcast and the Rule Your Retirement and Total Income services. It really depends on which state you're in. That determines which one you'll be opening up. The basic point is that minors can't own investment accounts, so it has to be a custodial account with an adult's name on it and your state will determine which one you open up.

Barnes: And then from there Grandma or Grandpa or a guardian or parent are going to open that account for their newborn or anyone up to the age of majority, which depending on your state could be 18, 19, or if they're in college 24. Then they'll be able to purchase, if they please, individual stocks, real estate, bonds. With a 529, normally you're utilizing funds that the 529 custodian is going to say if it's available.

Gardner: So 529 plans are directed toward an educational outcome, as Jason was mentioning earlier. We've covered UTMA, UGMA, 529s. Are there other accounts that we should be thinking about as parents or mentors, or do those pretty much capture it?

Barnes: Those are the big ones. Also, a parent can open a Roth IRA for a child, but that is if you have earned income. So if your child has a summer job and they make the IRA limit amount, which varies on the year, then they can contribute that much for them. You can also use a Coverdell account. With those usually the maximum that you can contribute is lower than that of a 529 or an UGMA/UTMA. The gifting maximum for those varies depending on the year.

Gardner: So Naima, I'm hearing you describe these different accounts and I'm trying to put myself in the seat of our listener. We've done a good job talking about the possibilities. How do you open one of these?

Barnes: There's a bunch of different custodians you can use. You can go to places like Charles Schwab or Fidelity. You can also look at strictly online brokers like E*Trade and Ally Invest. Robinhood is really popular, but Robinhood at this time doesn't offer custodial accounts. They only offer individual accounts. I did find out that Stash, which is another app that you can use, offers custodial accounts so you can begin saving for a child on their online platform.

Brokamp: As you listen to all this, you might be wondering which one you choose, and I would say it starts with the goal you have for the money. If you want to teach your kid about investing while also saving for college, the 529 and the Coverdell are the way to go. The big difference there is with the Coverdell you can buy individual stocks and with the 529 you can't. I think that would influence it.

But if you're trying to get your kids started with a nest egg that they can control for decades, then I would look at the custodial or the Roth. The Roth is better if they have the earned income. We opened a Roth for my teenage son after he started a job as a lifeguard. But if they don't have earned income, you've got to go with the custodial. The drawback to that is once they reach the age of majority, it's their money.

Barnes: So they can buy a sports car if they want.

Brokamp: They can do whatever they want with it, and from a financial aid perspective, if you're looking that far down the road for college, having money in a Coverdell or a 529 is better than in a custodial account. So that's something you want to factor into that, as well. But if you're looking to really get the kid started and have them take over the portfolio someday, I would say the custodial or the IRA is the way to go.

Gardner: That's really interesting. Each of us can think back to when we did start investing. As I asked at the top of the show, some of us did so as adults. Some of us did so as kids. I had a dad who did the Uniform Gift to Minors Act account. We were trusted with the money that was invested for us and I'm really grateful because in some ways it became the seed capital for The Motley Fool. I'm deeply grateful for that.

I will say I did buy a sports car. Sports cars were cheaper back then. Sports cars were much cheaper and also -- a humble brag here -- I had a full scholarship to college so my dad was happy and was probably OK with me spending some of that on a car.

Before we move into the middle years where we're talking to kids who can understand and respond back, and what we should say and how we should train them, you do want to think about playing it forward. What's the right cultural answer? Not for our culture but for your culture. Your family. For our family, we raised them in an environment of trust, which may sound very wholesome. It hurts a lot sometimes. It's not always right for everybody. It was right for me as a kid and then it's what I did for our kids.

I also had them with the UGMA account, which we could add to. It could be stocks and all the way through, but the wills and estates guy that we consulted with 10 years ago was saying things like, "I'd never do that. I don't trust my kids." Indeed, he was probably right. We all have a different culture that we come from, and some overlap, so there's a philosophical question. Before we proceed forward into kids who are 8, or 10, 12, does anybody want to add anything along those lines? Have we really tied a bow on starting newborns? I hope we have for our listeners, but anything more to add before we advance?

Barnes: Just a note. It doesn't have to be a parent that starts a 529 account. I started one for my brother because I wanted to make sure that when he went to college if he needed a new laptop or some books that he would be able to have that.

Gardner: That is awesome!

Brokamp: That is very thoughtful.

Gardner: Naima, I needed you as my sister. I love my sister, but that's really loving.

Barnes: Now, don't get me wrong. I have two other sisters, so they probably will hear this and will not be too happy.

Gardner: Just don't tell them that you were on this Rule Breaker Investing podcast. Just don't tell them.

Barnes: They also did get scholarships, though.

Gardner: That's pretty great. Good for them. So we've talked about types of accounts. We've talked about it being as simple as, in Mr. Trapp's case, the man who triggered this podcast, he's got Schwab, so he could just start talking with his Schwab representative and surely that will work.

But maybe a question to the group here about amounts. Can you add on a regular basis? How much should you start it with? Any thoughts from the panel about that?

Moser: I'll go back to the word that I used from the very start and that's the "goal." We were not trying to accomplish, in setting up these 529s, being able to pay for everything. My wife and I would like our kids to have some skin in the game and figure out a way to get grants, or scholarships, or work during school.

Gardner: Scraps.

Moser: We wanted them to have a little ownership. The goal wasn't really to fund their entire education. With that in mind, $500 seemed like a reasonable number to get the account opened. I don't know why. I just picked it arbitrarily. And then from there, I think you can set that monthly deposit to whatever you're comfortable with, whether it's $10 or $100. I think the key is to just get it going immediately. That compound annual growth is just the most phenomenal thing, and the longer you have a chance to let it work for you, the better off you're going to be.

Daniel Messeca: I'm Daniel. I'm a financial planner with Motley Fool Wealth Management. We have a newborn. She's 6 months old...

Gardner: Congratulations!

Moser: Congratulations!

Brokamp: Congratulations!

Messeca: We also started with a 529 and figured that was the best way to go considering our goals. We front-loaded it a little bit, because we're in a position to do that now and don't know what the future holds for us. To take advantage of that compounding we figured we'd put as much as we could in today knowing that we may have conflicting goals in the future. We'd know that we took care of that to start with.

Gardner: I'm glad you just jumped in, Daniel. For our listeners, this is our full panel now. Just to make sure it's clear I have Naima Barnes, Daniel Messeca, Robert Brokamp, and Jason Moser joining with me, so we have five voices that you're hearing from five different perspectives. Daniel, congratulations! Did you get a little paternity leave from The Motley Fool?

Messeca: I got plenty of paternity leave.

Gardner: I'm glad to hear that.

Messeca: More than I wanted!

Gardner: That's a really important thing that we figured out a few years ago at The Motley Fool. We weren't doing that 25 years ago, but we've definitely been doing that for some years. Robert, you and I are old hands here at The Motley Fool.

Brokamp: I know.

Gardner: Do you remember your paternity leave?

Brokamp: I did not get paternity leave.

Gardner: I didn't either.

Brokamp: But we have such a flexible workplace that it worked out OK.

Gardner: I keep wanting to jump it forward and talk about how to talk with kids about stocks and we are going to get there, but going back to one more thought here, which is about the goal that Jason started us off with. I do remember the Uniform Gift to Minors Act account, the custodial account I was given that my father, in this case, decided what age I would get that. That's a choice, too, and that's a little bit more about philosophy and I'll just talk briefly about how I changed it up for my kids.

I received my account at the age of 18. I'm glad that I got started that young. It was responsibility for me. It wasn't enough that I was going to be retiring, but it was enough that I didn't have to run out and get a job right after college. And I was managing that account during my college days.

It was arguably a little distracting. I was not a trader, by any stretch of the imagination, so it's not like I was highly distracted. But as I thought about what I wanted to do for my kids, I decided I wanted to make it 21 for them. I think there are different ages that we can choose for those accounts and so for me, anyway, or for the Gardner kids, when they turn 21 they get theirs. Again, more toward that goal orientation. More toward trying to make the best call for you and your family or your situation and not expecting a cookie-cutter answer from our talented panel.

So if there are three chapters in this conversation, that's the end of Chapter 1; Chapter 1 getting newborns, getting Daniel's six-month-old going on the 529 plan when kids don't even know what you're doing for them and how you get that started. And darn it, it's so busy, our lives, especially these young parents having to do all the other things that this feels like yet another. But darn it, we hope you'll prioritize that because when you think backward from the future, this is one of the most important things you can do.

It's good to send thank you notes for gifts at baby showers and these kinds of things, but I would suggest that this will stand the test of time in a more powerful way. So we hope, with this podcast, you'll start to prioritize that if you weren't already before.

Chapter 2 is the child who is 8, 10, 12. He or she can recognize, now, what you're doing. They're starting to learn about the world. How do we talk about investing money -- maybe even business -- with kids? Daniel Messeca, we were chatting by Slack which is, by the way, not sponsoring this podcast. This podcast is not brought to you by Slack because nobody would pay us for this podcast this go-round.

But we were chatting briefly on Slack before this episode and you were mentioning a story of how you got started at the age of 8 by your grandmother.

Messeca: Yes, my first memory of investing was when I was 8 years old and my grandmother asked me a question. She said, "If you could own any business in the world, which one would it be?" And being 8 years old and I wanted to rule everything, I thought of the largest business I could think of and that was Coca-Cola, a product I saw everywhere, every day.

So she bought shares of Coca-Cola for me and taught me what it meant to be a business owner and let me know that I was now actually a part owner of that company. I was very proud of that and learned how to look up the ticker symbol in the newspaper. I'd track what was going on much like a kid would do with baseball statistics and went about my life feeling vested in that company.

Gardner: That's incredible! What a great gift from Grandma!

Messeca: It really was. I think it was really important to her that I understand what owning shares of stock meant. She did the same for my brother. He picked McDonald's. Both turned out to be really good choices, by the way. I was an investor ever since in an UGMA account. I invested money that eventually helped pay for my wedding and my house. I even remember as a kid going to Atlanta to the Coca-Cola factory and thought it would be very important for them to know that I was a shareholder and I would get some special treatment.

Gardner: Love it!

Messeca: But I think that really set me on the right trajectory and because of that I knew what it meant to be an investor.

Gardner: Let's be analytical in a way that's almost unfair to a lovely story from one's childhood full of nostalgia and prosperity. Let's be a little analytical getting underneath that. What one, two, or three things was she doing that I can hear and then put into play in conversations I might have with an 8-year-old?

Messeca: Pride of ownership, so know what a stock is, because a stock is a very conceptual thing unless you know you're owning a company. At its core that's what you're buying. The second issue is building passion. She made sure I picked something that I was excited about. Thankfully it was publicly traded and she could buy shares. And then she got me engaged. So learning how to look it up, which is easier these days, was something I could continually do that made it a part of my life and made it a habit.

Gardner: Did anybody have a similar experience as a child, themselves, or a highly contrasting experience?

Brokamp: I was not quite a child -- I was more of a recent college grad -- but I had a very similar experience, at least related to Coke. Just hearing someone tell me, "You can buy that Coke, drink it, throw it away, and then you have nothing to show for it. Or you can buy part of the company and five, 10, or 15 years down the road it will be worth more than you spent."

Messeca: So along that same vein, a few years ago a much younger brother-in-law had a ton of video games. It was his birthday and, for better or worse, I really didn't want to buy him another video game but felt it would be meaningful to buy him shares of Activision...

Gardner: Nice!

Messeca: ... and thought let's get him down the same track that I was. I thought he probably wouldn't care about it at all, but he was actually very excited to see that he owned shares of Activision, which was putting out a lot of the games he was playing. I think it was the same thing. He could have a game, or he could be a part owner of this thing on which he spends a lot of money and hopefully build some wealth.

Gardner: And I see a lot of heads nodding around this table because we all feel that, I think. There's no better feeling, really, than feeling like every dollar you're throwing at a company you're actually going to make even more than that back by owning its stock. That's true of some of the great consumer companies of our time and we just named some of them.

Moser: I've got a pantry full of McCormick, and it seems like every dinner has some McCormick product involved.

Gardner: Jason, do you sometimes open the cabinet and just gaze?

Moser: I look at it and I just beam with pride.

Gardner: And you won't say this to anybody else in your family, but quietly.

Moser: One of my favorite businesses in the world. Listeners to the Market Foolery and Motley Fool Money know I'll talk about that company all day if I get the chance.

Gardner: It's been a great performer for Stock Advisor, among other companies.

Moser: A wonderful business.

Gardner: So it is that experience of the product or service for a lot of middle-school-aged children. I think it's a very appropriate time to talk with kids about that. They know the world well enough, and so really what you're doing is you're hooking in this entire financial component to the world that they're otherwise seeing and you're letting them know, switching them on, that you can be making money at this thing that you love, as well.

One part of it might be showing them where that stock was 10 year ago, whether it's Disney, or Coca-Cola, or McDonald's, or Activision Blizzard. Another part of it is just making them more active observers of that company going forward. Beyond just the pride that Daniel mentioned, you also talked about your grandmother giving you an awareness and an interest.

In fact, you pushed it further, Daniel. You said that she taught you something about business. Was she an entrepreneur herself? That's such an important thing for us here at the Fool -- that it's not just about the markets. It's as much about the businesses themselves and connecting those things.

Messeca: Yes. She is an entrepreneur. She ran an antique gallery back in South Africa where she's from. She runs a real estate practice now, and I think that probably imparted some entrepreneurial spirit in me that I still have today -- getting involved at such a young age with that kind of understanding and excitement.

Gardner: Just to stick with the chronology that we've been shaping -- the narrative of the newborn to the middle child -- one thing we hope our listeners are inspired to do is to start that account early. And that's kind of the nuts and bolts. That's blocking out the time. Having the conversation with the financial representative. Getting the account funded. But really from that point on, it's as much about the conversations we have and the culture that you raise that child in, and I want to talk briefly about that.

Certainly, one thing that we all love here at The Motley Fool -- you're not required to feel this way to be hired here, but I bet you often do it automatically -- is that you love business. You think it's amazing that we have these trades. You're good at this and I'm good at this, so I'll buy from you and you buy from me, and it's a much better world when I'm getting your best, and you're getting my best, and we're trading back and forth.

So there's a lot of positivity to that. There's a lot of optimism to thinking that the world will get better. I think that it has in so many ways. Of course, never perfectly and sometimes worse in different contexts. But for the most part, look at a graph of the Dow Jones Industrial Average over the last century. It starts in the lower left and it goes to the upper right and that's our expectation over the next century.

Given that, I feel like we're talking a lot about the dos -- do this, do that. Does anybody have a "don't" that's on their mind? Something that didn't work for you either as a young person growing up or with young people that you're associated with?

Brokamp: I have, anecdotally, heard stories of people saying, "My kid loved this company, so I bought that one stock and that one stock didn't do well, so therefore..."

Gardner: GoPro! GoPro! They loved the GoPro!

Brokamp: Exactly. Pets.com. "Oh, my kids love pets. We'll get Pets.com." It didn't work out, and that's the wrong way. I mean, every kid should learn that stocks do go down and some do go out of business.

So what's we've done for my kids is they've been allowed to choose stocks, but we have also had index funds -- both U.S. S&P 500 and international -- so that they understand the ups and downs. It's just the overall stock market as well as understanding the ups and downs of individual companies.

Barnes: And with an index fund you're able to get exposure to a bit more than maybe one share of Amazon if you can swing that, so not all of your eggs are in one basket. You have some exposure to maybe 500 companies if you're in an S&P index.

Gardner: I have to admit. There is a strong bias -- not even an unconscious one on this podcast -- about owning stocks and loving stocks, but certainly I know, Naima and Daniel, you both, in particular, are probably every day fielding questions and having conversations that are far more often about funds than about stocks themselves.

Messeca: That's true. And earlier you asked about amounts, and I think that speaks directly to your goal for helping someone get started. If you are trying to teach a child about investing, you probably wouldn't want to give them access to everybody you've been saving and tell them to invest it. So maybe putting a smaller amount in the individual stocks they're passionate about and the rest in something like an index fund or a morewidely diversified pool of stocks may make a lot of sense.

Moser: And I think framing it up from the very beginning that expectations are realistic. We have brokerage accounts for each daughter, as well, where they are able to add individual stocks.

Gardner: I was wondering about that, Jason, because you've mentioned picking stocks with them, but then you were saying 529, so I was thinking...

Moser: They do have both, actually.

Gardner: Yes, that's great.

Moser: Perhaps we can get into that story, as well, but my main point being in framing the expectations from the very get-go and saying, "Look, you're going to have this account. You're going to have this portfolio. You're going to own shares of 12 different companies. They're not all going to be winners. As a matter of fact, probably four of them are going to be losers, and that's just the name of the game."

It's not about batting 1.000. It's about finding some great businesses -- investing in a lot of different businesses -- and chances are that the math will work out where you get some good winners, and when you get some really good winners, they can just keep going up and up when really the down side is capped at zero for virtually any individual investment. I think framing the expectations appropriately from the beginning helps particularly when they're kids in understanding what they're actually trying to do.

Barnes: And this helps to teach them to be long-term investors, because they may see that one of their stocks went down so they want to get out. Or had those conversations of, "Let's wait and see how it does over this period of time."

Moser: Definitely. I think starting at that age, there is this added benefit where they're only so interested in it until they want to actually go play a video game or talk with their friends. It's not like we're sitting at the dinner table, every night, talking about their portfolios.

We'll probably check in maybe once a quarter and say, "Hey, look, there's your Apple stock. You've owned that since 2013. It's up 150%. But oh, look. You've got TripAdvisor there, too, and that one's still down. But you've got this big portfolio of 12 stocks now, and it looks like you're doing OK." Then they want to go off and do something else.

The benefit there is that at that age they're only so interested in it. They don't want to talk about it all the time. And when it's not something that's at the top of their minds, they're certainly not saying, "Oh, man, I really ought to sell that TripAdvisor position because it's obviously a loser." And as time goes on, they do see the benefit of ignoring it and letting it take its course, as some of those losers can turn out to be winners after all.

Gardner: Certainly one of the recurring themes of this podcast is a love of games. I'm curious if anybody else had the experience I did, which is I first got excited by the stock market not by my parents, but by a fourth grade contest that Mr. Hoskinson at St. Albans School in Washington, D.C. ran for us, where we each were supposed to pick 10 stocks. We typed them in and kept up. It wasn't even that we typed them into a computer, because this is quite a long time ago, so it was more like a typewriter. Maybe handwritten.

But as much of the game was about looking in the newspaper for the stock quotes and writing them down and doing some math, so it was as much about math. But I did something that I think a lot of my fellow classmates did. I went home, let my parents pick my stocks for me, and as it turns out, my dad, in particular, distinguished himself and I won the contest about three months later which, by the way, we all know three months doesn't tell a lot. And that was incredibly lucky that as a reward I got this oversized -- I can still see it -- Hershey bar. I think it might have been with almonds.

You know how you have $25,000 checks that are bigger than four people? Well, that's how that candy bar looks to me today, years later. So I think for kids who enjoy games -- at least that was true for me -- gaming it up. Making it a little bit of a competition. Maybe a family competition or just the math of it could also speak to some kids.

Moser: If you recall, speaking of gamifying it and combining the gamifying and the media part of it, my daughters, not all that long ago, were part of a Supernova exploration...

Gardner: Ah, yes, Jason...

Moser: ... and they helped participate in whittling down the four companies to one eventual winner. I believe that winner was Hasbro. My daughters were thrilled. They own shares themselves...

Gardner: Wonderful!

Moser: ... and that really, I think, lit the fire in them. Even now they are telling me that they want to intern here when they're old enough, and then they want to get a job here. So thank you, David! You've offered some financial security for generations to come.

Gardner: I think you're doing a little bit more than I am, for them, in that regard, but thank you, Jason! Thank you for that reminder! So yes, not everybody's going to have the opportunity the Moser girls have hanging out at Fool HQ, but anybody can make it fun for a child. Anybody can game it up.

Not everybody loves games, but if your kids do, then yes, there's things like fantasy football. There are fun mobile app games. But the stock market and following stocks -- and maybe having a competition with the cousins or the parents, or a family thing -- we're here at the start of a new year. In a sense every day is the start of the next 365 days. So you could kick off a little competition and that might speak to a child.

Before we go to Chapter 3, which is going to be twisting the arm of a high school or college grad to get them started, I wanted to ask just a little bit more about money. I think when a lot of people think about money and kids and middle school, they're not really thinking about the stock market or a 529 plan. They're thinking about allowances or how to do money right or better with kids.

Any opinions from my talented panel about things that aren't investing but are money for middle-school kids?

Barnes: I'm just going to say a disclaimer. I do not have children, but one of the things I remember as a child, in terms of allowance, is I had a really good friend whose parents provided a monthly base allowance and then they would get different dollar increments depending on the chore. You would get your $10 a week, but if you decided that you wanted to mow the law or shovel the snow off their long driveway and the stairs, then you got an extra $20. If she babysat her younger siblings, she would get an extra $5.

So however that played out, it would teach the value of save, share, and spend. Utilizing that where it's automatic, and every time I receive an allowance, a portion of it, whether it's $1 or $2 is going toward saving, going toward spending, and then also going toward sharing if you want to teach them to be philanthropic.

Gardner: When I think about allowances, I think of just how incredibly lame I was as a parent...

Brokamp: I'm with you!

Gardner: ...and how inconsistent... Robert? You, too?

Brokamp: Yes.

Gardner: We were so not best practice on allowances for kids. We did it sometimes and not others. There was no earned component, which I think Naima spoke very well to. I still feel OK with how our kids have turned out, so I'm not sure it's all about having the right way to do allowances, but I'll say this, Robert. You can be pretty bad at it and not do, I hope, permanent damage to children.

Brokamp: I will say I'm pretty confident that the evidence is clear that whether a kid got an allowance or not did not have a huge impact on whether they were financially successful later in life. Because I looked that up. Chores are a different thing. It is good for kids to do chores, but the allowance was not as important, which made me feel good because I was horrible at doing it. Mostly being the kids would say, "It's time for my allowance and I didn't have the cash." That was the problem.

Gardner: We also weren't great at Tooth Fairy, for the record. When it came to, "Mom! Dad! The fairy didn't come!" I'd say, "Oh wait! No, no! No, honey, honey, honey! Look back underneath. Oh, it fell! Over here on the floor underneath the pillow!"

Brokamp: It fell in my pocket!

Moser: You're playing a game. Part of it is to try to find it!

Gardner: I also want to say something before we move to Chapter 3, our final chapter, about matching, because while I never did this, we have had some great stories. We've told them in some of our Motley Fool books of the past true stories about usually kids with a lot of initiative who realized, just like we talked about, the power of corporate matching like your company matching your 401(k) donation.

Let's say your child saves a dollar. You could say, "For every dollar, honey, that you save, your mother and I will give you one extra dollar." But some kids have an extra dose of initiative and so the stories that we've told through our books are kids who said, "You know, beyond just Mom and Dad, I have aunts and uncles who love me. I have grandparents who love me. I have mentors that might be proud of me if I got an A."

And so there are stories of kids who, for every dollar they save, all of a sudden twelve additional dollars are being triggered through conversations with family members. For every "A" that was earned. And then you can have huge amounts of money sometimes -- well more than you would expect -- if you have a culture surrounding you that wants you to succeed at saving or doing well in school.

So before we move on, I want to talk briefly about the power of matching. You hope your company or workplace does it for you as a professional. Darn it, you can do it. I would encourage us all to do that. For younger people in our lives, if they do something well, give them an extra buck match.

Moser: I agree. I'll say that while we, in concept, have matched, we didn't really apply a formula or any sort of consistent philosophy to it. It was more I'm kind of lazy and I don't really want to keep track of all the numbers.

Gardner: Yes, the Brokamp/Gardner approach to allowance. It was kind of lame. Lazy, but well meaning.

Moser: Tooth Fairy money or birthday money -- part of that would be you may have that to spend, but part of that we want to put into your brokerage account so that you can contribute to your investments and have some ownership there. And then my wife and I would help top that account off so they could buy a few shares of a given company, so we really didn't apply the formula dollar for dollar, but the concept, I think, still works.

Gardner: In the story that I was thinking of, Jason, it was as much the child. She was just on fire when she had this matching and then started to realize in the most enterprising way that she could get all kinds of people; maybe like the mailman. Everyone's contributing matching what she was doing.

Some of these stories or ideas are going to make sense to some of us and not others. We're just trying to paint as much of the canvas as we can, knowing, in the end, that it's each person's individual, unique portrait.

Well, we've been promising Chapter 3, so let's now advance to Chapter 3. Now we're at the age where you're getting somebody started investing. You weren't ready for them when they were newborn and you may have had some of these conversations. Maybe there was part of the Gardner/Brokamp alliance of lame allowance approach.

But here you are finally, and darn it, this person has just graduated high school. They've got a diploma and a smile on their face. Or maybe college. Or maybe just a little bit after that. So we're talking about adults or near adults and getting them started investing, and certainly that's true of many people hearing me today. And a few months hence it's going to be graduation time all over again. Yes, the winter will finally thaw and spring will spring anew, so let's talk about that stage of life and getting "kids" started investing. Daniel?

Messeca: It's funny that you were talking about matching a moment ago, because if you're the parent of a college-age student or a recent graduate, what I have actually seen the most often is those are the people who you motivate through matching, because they don't have money to invest themselves at that point, and they really don't want to siphon off funds when they need it for anything else. So I've seen a lot of parents trying to motivate them to put dollars in, by matching dollars in those instances, when they might not have been brought up to save on their own.

Gardner: That makes a lot of sense. So in addition to that first job that they're hoping to get after high school or college, and have a matcher in their employer, we could do that as parents, or aunts and uncles, or whoever we are.

Brokamp: And I do think it's important that if they are starting a job -- they've just graduated from college -- you have that conversation about the 401(k). You say, "Listen, that's one of the first things you should do." Most plans do have a match. You want to sign up as soon as possible.

The thing I've told my kids, over and over again, is if you want to retire in your sixties you've got to save 15% of your income as soon as you start working, and that includes the match. So here at the Fool, if you contribute 9%, the Fool matches 6%, and you hit that 15%. I've drummed it into their heads that as soon as they start working, they've got to save 15%.

Barnes: And even if you are unable to save the entire 15% you may not want to discourage people who are in that situation in the beginning. It's being able to get the match and get 100% of the match. If they match 100% up to 6%, you want to get that 6%, so make sure you put in 6% and then you'll be able to get some free money.

Brokamp: Even to the point of helping them fill out the forms, because I think that's one of the big stumbling points with a lot of financial planning stuff. Whether it's applying for life insurance or opening a brokerage, they look at these forms and they don't even know how to answer some of the questions, the beneficiary designation and stuff like that. Help them with the paperwork to get them over that hurdle.

Gardner: Yes, I was wondering about that, Robert, because we talked earlier in the show, in Chapter 1, about those different types of accounts you can start, and we gave you a few marching orders, I hope, to do that. What is it like when you've got an adult on the other end, let's say a 22-year-old? Can you fill it out for him or her or, darn it, should they be doing it at that age themselves? If it's intimidating, how do we march people into an office and get them to sign a form to get it going?

Brokamp: Well, I've been helping my oldest daughter, who's in her twenties, open up a Roth IRA. I would say you do it together. I told her where I think she should do it. I told her her investment options. I'm not going to tell her how to invest, but these are the investment options. Center the link. She's going to be at our house tomorrow night and we're going to seal the deal and make sure she's taking care of it.

Gardner: And I'm sure you've written yourself in as the beneficiary designate.

Brokamp: Absolutely!

Gardner: And that's why you're in this process.

Barnes: My sister recently got a new job and we had a conversation about everything from picking her health insurance to deciding whether she's going to get life insurance through her employer.

Gardner: Will you come over to my house, Naima? It's not just her that would benefit from some of that.

Barnes: Yes, so definitely doing that. And then talking to her about the importance of using her 401(k). She's also planning a wedding, so being able to create that budget so that you can save for the wedding since that's going to be something coming soon. But also being able to help save for your retirement, even though it's many years away for her.

Gardner: Naima, earlier today in Fool HQ we had a Fool School, one of our Fool School sessions. We had some 22ish-year-olds in there, and we were speaking to them. You were there, because you're one of our heads of Fool School, and Jason, you've done a lot for Fool School, too. I know that you're both experienced talking to people of different ages. Naima, what are one or two things that you said to the young man who came and visited us earlier today that would be applicable to anybody listening here?

Barnes: The biggest thing we talked about today is that anyone can be an investor. A lot of times the message is that you have to be something who is older and knows a lot about money in order to invest, but you can be someone who works in any type of position. It doesn't have to be a position where you're making $1 million a year or some six-figure amount.

We also talked about the three things that they can potentially do today and getting started as soon as possible is one of the biggest things outside of the three things. We talked about the three accounts that they can open in order of importance with one being the employer-sponsored plan if their employer offers that.

Gardner: So if they can only open one account, you would say that type of account first.

Barnes: That would be the one I would say first.

Gardner: Because your employer is matching.

Barnes: Yes.

Gardner: I heard you say free money.

Barnes: Free money. You want to get free money. Who doesn't want free money? Then second, if you're preparing for retirement; although it is very far away for people who are in their twenties, it still should be something that you keep on your mind because I know that I want my seventy-year-old self to be able to enjoy her life and also be able to help her children and grandchildren when she does decide to have them. So being able to use a Roth IRA or a traditional IRA to save for retirement after your plan from your employer.

And then for shorter-term goals I like to use just a taxable account or for things that are going to be outside of the amount you can put in an IRA. I like to use the taxable account for that, too.

Messeca: That was my first financial planning lesson -- when I was 19 years old and got my first job in college -- was learning the power of the Roth IRA. My uncle made me read a book, building your Roth IRA wealth, and it was really eye-opening about the power of compounding with an account like that. That's when I opened my first account and started putting some money of my own into a Roth IRA and investing there.

Gardner: Obviously at Fool.com and other resources, too, you can read a lot more than we can cover in a given podcast, but I think the headliner there, Daniel and everybody, is that the Roth is often a great choice for younger people -- the ones we're talking about right now in Chapter 3, because you're paying a tax up front on the money that you put in.

This may sound like a bummer, because if you put in $1,000 you have to pay like $200 of it right up front. You're only getting to invest $800. But here's the good news. You let that money compound over a few decades and there's no tax you pay on the other end, so the math works out wildly in our favor often if we go with the Roth IRA for young people.

Moser: And I think it's probably worth considering having a little bit of everything. I loved your approach of a nice, taxable brokerage account where you'd have the ability to do some stuff with that money as you're living your life. I have the same and it helps when we want to travel or go do something. Then I've got my retirement account here with the Fool, and that's a Roth 401(k). And then I have a conventional IRA that is just all of the different jobs I had before, where I rolled over the retirement savings that I had accrued from those jobs.

So you have a little bit of it all and it does make a difference, because with those conventional IRAs, once you start taking that money out and you eventually will have to, you're going to be taxed on those withdrawals, whereas with that Roth, you're not going to be. So it's nice to have a little bit of diversification there, which is, of course, what we preach when it comes to stocks, as well.

Brokamp: And so many younger kids, especially if they're working in high school and college, are not making enough money to even pay taxes. They're making less than the standard deduction. You wouldn't be paying taxes anyhow, so the Roth is a no-brainer in that situation.

Gardner: Well, I feel like we're getting near the end of our conversation. This has been a lot of fun. More importantly, though, I hope it's been really helpful for you, our listener, whether you're listening to this in January of 2019, when it was originally taped to start the new year. What better way to start a new year, if you're here around Fool HQ, then to have this conversation? Or maybe you're hearing this months or years later. I hope that this information and maybe beyond information -- perspective -- maybe a little bit of wisdom here from The Motley Fool is helpful for you.

Let's close this way, team. Let's go with our final bit of advice. So reflecting back on the conversation we've had. Also if you think we've missed anything. I don't want any listener to feel like, "They never talked about this or that." Any final thought or suggestion. Let's start with Naima.

Barnes: I'm going to go with two. One is start today. Start today. And then the second thing that I didn't mention earlier is a great platform called Stockpile that is really cool for gifting. A grandparent, parent, an uncle -- instead of giving a holiday gift -- why don't you give them stock? You can buy gift cards from Stockpile from denominations of $25 up to $2,000 and that's pretty cool. Then they can go and invest, even in fractional shares through their website. They also have ETFs.

Gardner: They're also not sponsoring this episode of Rule Breaker Investing, but Stockpile.com, spelled as one would expect. It's fun, because you can give a gift card, except rather than get $25 off at Starbucks or Chipotle, you can actually get $25 toward ownership of Starbucks or Chipotle. I think all of us around the table and I trust many of our listeners realize which is more valuable 10 years later.

Barnes: It's pretty cool. And they do also offer custodial accounts, as well.

Gardner: Well, that makes a lot of sense given their business model. Thank you, Naima! A delight to spend time with you this podcast. Daniel?

Messeca: If I were to give advice for helping a kid get started investing, my two things would be to keep it simple. They don't care about Roth IRAs or custodial accounts. They don't need to know. Just do it. The other would be to make it fun and make it engaging. Make it something that they can relate to. That way you're building a passion instead of just something happening in the background.

Gardner: Robert?

Brokamp: I will piggyback on what Naima said and that is just to do it. Our biggest mistake was to try to find the perfect solution and the perfect investment, and we procrastinated too much. We funded accounts, and I felt all this pressure that these are our kids' first investments and I want to make sure we get it right. In the meantime that money just sat in cash for too long. So don't worry if it's not perfect. Whatever investment you pick will teach a good lesson.

Moser: Those are really hard to top, so I'm going to try to expand a little bit.

Gardner: That's legit. I'm doing the same thing.

Moser: I'm going to actually show we do have a video component I think, right?

Gardner: Yes!

Moser: For those watching on YouTube.

Gardner: Yes, we're on YouTube!

Moser: When we're talking about gifts, holiday seasons, birthdays, they're a great time. I love stocks as a gift idea. You don't have to pick them up off the floor. They don't require batteries. They're not going to break. And it's as easy as just transferring from your account over to their account, too.

Gardner: Love it!

Moser: And you print out a nice certificate. See, that's what I'm giving my daughters. Their mom and dad are giving them five shares of Square each. And they know Square because they see it everywhere we go. They realize, "Oh, you're paying with Square." They see the Square stuff there. I think giving stocks as gifts is just an awesome idea. I love it. And you don't have to worry about that matching thing, David. You're just giving them all that money right up front.

Then to Daniel's point, keep it fun. I mean, going back to the very lesson that introduced my daughters to it -- and I've told this a million times, but it never gets old. It was just us going to lunch at a Panera one day. They were 5 and 6 years old, and I told them that we happened to own a little piece of that restaurant. They couldn't believe what I was telling them. And, of course, it was just through Panera shares ownership, but that's what got that discussion started and it kept it fun.

So from there they see their portfolio, and they see that as these are all the businesses that they're owners of, and these are the businesses that play into their lives in some way, shape, or form. That keeps it fun and that keeps it interesting.

Gardner: Often people say last but not least, but I'm going to go with least, because I like what you all said. So last and least, I'm going to say that a lot of what we've talked about is about touching off and getting somebody started. Switching that person on. But after that, the rest of the game is about staying "in the game."

So if we've made any mistake with this podcast, we gave you some scaffolding. We gave you a guide and a little bit of inspiration to get somebody started. But really, it's about staying in the game. It's about saving. That's the hardest thing to do in our world today.

The reason most of the world isn't an investor today isn't because they trade in and out of the market. Some people do make that mistake, but really, much of the world isn't in investing because they don't have capital yet, and that's because they haven't learned to save. And we've seen people in desperately poor circumstances be net savers and it's always very inspirational to me and to us here at The Motley Fool.

So I believe anybody can do it. You can do it. You can do it on behalf of a younger person, as we're talking about here. But it's about saving and then it's about adding and making a lifetime commitment to your financial future or, in this case, that of somebody else's. Making it clear to them that even if it's a bear market, and even if 2018 didn't end well for the stock market, who knows about the future? Whenever you're hearing this, who knows what it holds, except that I think it's going to be better and especially if you give it time.

For Naima Barnes, for Daniel Messeca, for Robert Brokamp, and Jason Moser. I'm David Gardner wishing you the very best at touching off positivity in somebody else's life. Somebody younger than you -- maybe more than one person -- and getting him or her started investing.

Fool on!

As always, people on this program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Learn more about Rule Breaker Investing at RBI.Fool.com.