Published April 2001

Teach kids now about value of a dollar — invested

By Eric Cumley
Columnist

Many people become successful investors only after going through years of false starts and learning some hard lessons. If you want your children to avoid these troubles, start teaching them good investment habits while they’re young. You’ll be doing them a big favor — and your whole family can have some fun along the way.

Of course, there are any number of ways you can teach your children about investing. You’ll want to explain the benefits as well as the risks that are inherently involved, such as the chance of losing money. Here are a few suggestions:

— Match children’s contributions. If you have a 401(k) where you work, your employer may match some of your contributions. You can apply the same principle to your children’s savings accounts. For every dollar they put into the bank, you could put in 50 cents. Then, once they reach a certain level, such as $500, explain to them the benefits of making their money work harder for them, either through a high-quality mutual fund or individual stock.

— Look for “kid friendly” investments. The explosion of mutual funds in recent years is good news for parents. Several child-oriented mutual funds are available. These funds issue enrollment packets that explain investment basics through kid-friendly newsletters and interactive materials. Also, these types of funds invest in names that are well known to children, such as McDonald’s, Disney and Nike.

— Play a family “stock picking” game. Just for fun, have everyone in your family choose a stock to follow for a month or so. At the end of that time, award a small prize to the person whose stock has done the best. You also may want to add some “qualitative analysis” by examining the different factors that may have caused the winning stock to outperform the rest. You’ll want to keep all explanations fairly simple, but don’t underestimate your children’s ability to grasp fairly sophisticated concepts.

— Set a good example. Talk to your children about how you are saving and investing for the future. Depending on their age, they may be able to understand the figures on your investment account statements. Let them know when you’ve reached a particular savings/investment goal. Make sure they understand the concepts of setting goals, selecting quality investments, making regular contributions and delaying gratification.

By showing your kids the right paths to follow today, you’ll be helping them acquire financial skills that will serve them well for years to come.

Eric Cumley is an Investment Representative with Edward Jones Investments at 1201-C SE Everett Mall Way in Everett. He can be reached at 425-353-2322. Edward Jones is an NYSE-member investment firm with more than 7,000 locations nationwide.

Back to the top/April 2001 Main Menu