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. (Hey, even if they're 26 and 28, it's not too late!) 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), Coca-Cola (NYSE:KO), PepsiCo (NYSE:PEP), Abercrombie & Fitch (NYSE:ANF), Mattel (NYSE:MAT), McDonald's (NYSE:MCD), and more. Have them list five to 20 companies on a sheet of paper and research the ticker symbols and current stock prices. 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 our Quotes & Data area.)
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 Coca-Cola and your child wants to buy a share or two herself, you can buy 101 or 102 shares. Once your child turns 18, she can open her own brokerage account, and you can transfer her shares into it.
Get your kids interested in investing today, and they might end up helping to pay for their own college tuition. Appreciating its dollar value might inspire them to read more books and attend fewer 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 special online area for teens. Also consider giving them a copy of our new book, The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of.
Coca-Cola and Mattel are Motley Fool Inside Value recommendations.
