Six Great Ways To Introduce Kids to Stock Investing

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There is no better time to learn about investing than at an early age. The earlier the better. Although investing is not rocket science, a solid foundation can go a long way. It is a great idea to educate your children or youngsters with whom you are close about the pros and cons of investing so that he/she can determine what role investing will play in their life. Plus, it serves as an excellent opportunity to spend some quality time together and perhaps reinforce or supplement some of the information your child is learning in school or seeing on the television or Internet.

Where to begin? The investing universe is large and most likely, the youngster doesn’t have the knowledge of what a stock or bond is so the best way to start is by taking it slow. Here are six strategies that may help you begin:

(1) Look at a paper statement or online statements from your brokerage house – If you do some investing of your own, it is likely that you receive a monthly statement either on the computer or in the mail that provides you with an overview of your account(s). Take some time to sit down with the youngster and browse the statement. You do not have to go too in depth but this can serve as a good cursory overview of different types of investments such as stocks, bonds, certificates of deposit as well as what type of activity has occurred in your account. An account statement is brief, yet will serve as an excellent gateway to discuss the basics of investing.

(2) Look at investment websites – The Internet has a variety of resources for beginner investors. This can be a more interactive way to learn rather than reading books. You can look up the definitions of investing terms on various web sites such as Investopedia, or take advantage of the web site of your brokerage institution or regulatory bodies such as the New York Stock Exchange or Securities and Exchange Commission. Many of these websites will offer educational materials designed for middle school and high school students. The NYSE website even includes a poster-size explainer of the stock tables.

(3) Open a mock investment account – If you don’t feel you are ready to take the official plunge and use your hard earned money to invest with your youngster, there is nothing wrong with opening a mock account online which will simulate the investing process. It is as simple as searching for “mock trading account” through Google and registering online. You’ll get some practice under your belt in cyberspace and your youngster will learn about the ins and outs of investing first hand, particularly how easy it is to lose money. Then, when you feel comfortable, you can transition to the real thing.

(4) Start small – If your youngster seems interested in this investing thing, there is nothing wrong with giving him/her some money as a birthday or holiday present rather than an iPhone or Playstation. This way, you can make small investments together which will involve deciding where to put the money and hopefully watching as the money grows. You can purchase a few shares of stock or fractional shares, through ShareBuilder. Additionally, some mutual funds with low minimum investments are geared to small investors such as Monetta Young Investor at YoungInvestorFund.com. Accounts for children can be opened with a $100 minimum deposit and a $25 monthly automatic investment, or with an initial $1,000 deposit. Young shareholders will receive kits that include educational materials.

(5) Introduce Kids to your stock broker – If you work with a “brick and mortar” stock broker than it might be a great idea to bring your interested young friend to his/her offices. Not only will the youngster see what a stock broker does first hand, but he/she can see the computer trading system that the broker uses to execute trades. This may serve to get the child closer to the actual source and become more excited about the prospect of investing. Certainly, the broker will be able to impart some tried and true investing tips that will help get the youngster on his/her way.

(6) Dive into data. Finally, if your youngster seems to want to take the more quantitative approach to learning and already has a small knowledge foundation, a copy of the 2011 Stock Trader’s Almanac — a calendar filled with historical trading data, notable moments in the markets and much more — might be very helpful!

The key is to start early. By the time these youngsters become young adults, the sky is the limit!

Published or updated January 11, 2011.