Kids and investing: A good idea
Question: My 11-year-old son won some money in a math contest at school. He doesn't have anything that he is interested in spending his money on immediately, and I suggested that instead of spending it just for the sake of spending it, he might consider buying stocks and building a little portfolio. He seemed interested in this idea, but I wasn't sure where he should start. He has around $150. Can you help us decide where to start? Thanks! Michelle, South Jordan, UT
Answer: I think picking stocks is a fun way to learn about finance. It's also an activity you can do together. What a great idea.
You could talk to your son about the clothes he and his friends are wearing, and which companies make them. If he likes video games, he could look into various publicly traded companies such as Electronic Arts and Zynga. Concerned about the environment? There are green companies to investigate. What about Disney? And so on.
You can do research walking around the mall, looking at stores and what they sell a different way -- as an investor rather than a consumer. The same goes for wandering around your house. It's fun to do follow-up research on the web.
Whatever your child's passions or interests, there are public companies to research and follow on the Internet. It opens up a different way of looking at the world around him.
Your child may or may not make money picking stocks. I don't think it matters, although it would be nice to earn a profit. You'll want to open up a custodial account for him. Any financial firm will set one up for you. You control the account. Your child can't trade. Only you can trade. But it is your child's money when he becomes an adult legally -- usually at 18.
To keep the costs of the learning experience down, I would investigate low-fee, low-cost websites like Sharebuilder.com and Zecco. He'll be investing small sums of money. You want low charges on buying and selling stock. More important, you don't want any maintenance fees that penalize the small buy-and-hold investor. If you have a brokerage account, it might be cost-effective to open up a custodial account there. Check it out.