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Parents use stocks to teach kids about Wall Street

Jeff Tyler May 23, 2012

Parents use stocks to teach kids about Wall Street

Jeff Tyler May 23, 2012

Kai Ryssdal: There was some great news today for Facebook shareholders. The value of their investment rose 3.19 percent. About a buck.

Sadly, that’s where the good news ends. There are lawsuits and subpoenas and congressional investigations into the IPO to end all IPOs. That’s kind of what happens when there’s so much money on the line.

But there are some who bought Facebook stock who weren’t necessarily financially motivated. Marketplace’s Jeff Tyler explains in our new personal finance series, Money Matters.

Jeff Tyler: Last week, Karen Dodge bought a single share of stock in Facebook for her 9-year old daughter.

Karen Dodge: She has a little piece of history. A little piece of the zeitgeist. And hopefully she’ll learn from it.

It’s meant to be more of a teaching tool than an investment.

Dodge: Regardless of what happens to the stock as far as the price, the whole thing is an educational experience for her in what the stock market is.

Not everyone thinks this is the best approach. Stuart Ritter is a certified financial planner with T. Rowe Price.

Stuart Ritter: There are better ways to teach kids about investing and how to achieve their financial goals.

If the stock price rises, Ritter says kids could get the wrong idea.

Ritter: The conclusion could be, Hey, you can make quick cash in the stock market. It’s about picking hot stocks. And I’m good at it, ’cause look — I already did it.

Then there’s the issue of investing in just one stock.

Samantha Ritter: Don’t do it.

Seven-year-old Samantha Ritter explains the risk. If you invest in just one stock and the company performs badly…

Samantha Ritter: The stock will go low and you won’t have enough money. So you have to buy two or more.

She means buying stock in two or more companies. Her dad is teaching her about diversification.

Karen Dodge says her daughter is in it for the long-term.

Dodge: The stock market is not necessarily a place to make a quick buck. But if you buy a share of Facebook stock initially and, you know, 20 or 30 years from now, it’ll be worth a lot more than it is today.

And even if Facebook flops, she says her 9-year old is already diversified. She’s got a savings account, savings bonds and gold coins given to her by grandpa.

I’m Jeff Tyler for Marketplace.

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