Introducing Kids to the Stock Market

Introducing Kids to the Stock Market

With increasing popularity and options of stocks for kids, more parents are showing interest in teaching their kids basic investment fundamentals. Keep reading to know more...
AptParenting Staff
As a parent, you must inculcate money saving habits in your kids. If they're able to realize the value and worth of money at an early age, they will grow up to be responsible citizens. Hence, money saving tips are very important. It's never too late to start thinking of various stocks for kids to invest in.
However, you can't directly introduce your kids to the stock world as for them, it will be nothing but a mere flash of numbers, statistics and data. Just like someone who is buying stocks for the first time, kids need to be introduced to the world of stock market intelligently.
The Five Commandments
Generating kids' interest in saving money and learning more about the stock market is important. Once they have developed curiosity, they'll gradually learn to manage money in practical life. After all, the world's most renowned investor, Warren Buffet started juggling with stocks market and investments at an early age of 14 years. So why not your kids? Moreover, even as a guardian/parent, you can open your child's account, so that you can purchase stocks for them. But then there are lots of legal rules for buying stocks for kids, about which you'll be informed from the stock broker you buy it for them.
1. Discuss, Talk, Visualize and Explain
Introduce your kids to the world of the stock market. No. Don't make them sit through the latest business news channels and kill all their interest. Remember, it's the kids world. So, start from their perspective. Mind you, kids have become a major consumer in the market in the last decade. Hence, if you're out in a shopping mall, inform them about how the latest gadget by Apple is doing in stock market.
Kids are fascinated by gadgets, video games and all electronic stuff. Tell your 10 year old champ about how Steve Jobs made the legendary Apple. Generate their interest in this field. Similarly, every weekend, when you go to McDonald's or KFC, tell them the story behind these mega food chain stores? McDonald's stock is always doing well in the market. While doing all this, explain to them about stock market, especially utility stocks, as that they're essential for young investors. Answer their queries in simple mathematics and through simple examples.
2. Open an Account
There are various investment companies that provide custodial and guardian account for opening a child stock account. The account is on the child's name, but the right to carry out the transactions is done only by the legally registered parent. There are various types of other accounts for buying stocks for your small children, like the education savings account (ESA).
3. Set a Limit
Maintain your budget, and inform your kid that a particular amount on a per month basis has to be used to buy stocks. You needn't keep the money very high. This effort is just to introduce your kids to the world of investment, hence you can just maintain a specific budget. You can also invest in a couple of stocks of some companies, and ask your kids to find information about these companies.
4. Other Sources
You can purchase stocks directly from Direct Purchase Plans (DPPs) or of public companies that allow direct purchase of stocks. You can also contact several banks and institutions that have plans catered to the needs of child investment. Banks especially, have very good investment plans for children.
5. Explore Possibilities
Every week, set aside some time and sit with your kid online. Show him the reports, and growth and fall of stocks. In the beginning, he may not get anything from those graphs, but gradually he will be introduced to a whole new world of possibilities.
Buying stocks for kids is all about searching firms and companies whose stocks interest kids, and that they can relate to these companies. Stocks of DreamWorks Animation SKG, Inc., The Walt Disney Company, Nintendo Co., Ltd (ADR), PetSmart, Inc., McDonald's, Apple, clothes and jeans apparel are some of the best stocks for kids to invest in. So, now you know the perfect way to teach your kids the investment basics. You never know how big an investor your little champ can turn out to be in the coming years of his/her life.