Your kids
and stocks
Starting young provides a
valuable lesson in investing
By Jim Cramer
Special to The Connection
AS BOTH A MONEY manager and a father, I can tell
you there’s one thing you can teach your children
about money that’s more important than practically
all of the other financial advice anyone could ever
come up with, let alone reasonably expect to teach a
preteen. If you teach your children nothing else
about money, even if you don’t teach them how
to budget or save or stay out of debt, teach them to
be investors.
Plenty of parents teach their children about the
value of saving money, often by setting up a bank
account under each child’s name and showing them
how interest works. This is a fine thing to do, as the
compounding of interest is like the eighth wonder of
the world and I want everyone to see it. But I think you
can do better than that: Set up a brokerage account for
your children and buy them stock. Even if you buy
them only one share of one company, it will be worth
it, as long as you pick the right company.
The real trick here is to get your children interested in the market early so they learn about the ins
and outs of investing. If you feel that buying real
stock is excessive, you don’t have to set up a brokerage account. Instead you can create a rotisserie league
of stocks, where you draft some stoc ks and
your kids draft some others, using a limited
amount of play money. The winning
stock gets bought and put into the child’s
account. (The winner will be the stock
that appreciates the most over a certain
period of time, maybe a month.)
This teaches children a much more
powerful lesson than they’ll learn by starting a bank account. Investing in stocks will
give your children much larger profits than
if they had kept their money in the bank.
When kids see how much they
could make by investing,
especially if you teach
them about this at a young
age, they’ll be genuinely
impressed. Plus, this is an
opportunity for them to
learn about losing money
without it being too costly.
While most parents try to
teach their kids how to be
good sports if they lose (of
course, they all really want to
win), I think my stock rotisserie league is much better, “Investing certainly longer lasting and doubtless more impor- tant in its lessons. in stocks will
The key to making stocks come alive for children is to get them involved in something they know and make your
may get excited about. I can’t stress how vital it is that you make your kids excited about their holdings. I children much
used to grab the newspaper out of my dad’s arms each night when he came back from work, just to see larger profits
the closing prices of stocks that I was following on paper. What I wouldn’t have done to have been really than if they
investing in stocks. If we had had the Internet when I was young, I would have been going online to chart had kept their
how my stocks were doing. To capture the fancy of little kids—and they can money in
be as young as 6 years old—make a list of top-notch
brands that you and your kids know and like and the bank.
that your kids will naturally be able to follow. Think
clothing, games, television shows, movies or even ”
food. That way you can constantly refer to your
child’s holdings and get her or him comfortable with
the idea of actually having a piece of a company. You
will be ingraining the investment process and making it fun.
I urge you to buy one share of a
child-oriented stock, and perhaps talk
your parents into doing the same.
(If only E*Trade, Ameritrade, Share
Builder and Schwab had registries for
baby showers!)
Seriously, though, when I was little
the first thing my folks got me was a
passbook. The second was savings bonds.
These were yawners and
never encouraged
me to do anything
or follow anything.
Parents, if you
want to teach your
children about money,
buy them stock. C
Costco member Jim
Cramer is host of
Mad Money on
CNBC and Jim
Cramer’s Real Money,
a nationally syndicated
radio program.
The Costco
Connection
JIM CRAMER’S Stay Mad
for Life: Get Rich, Stay Rich
(Make Your Kids Even Richer)
is available in Costco warehouses and at costco.com.
Costco offers an easy
way for parents to set up custodial savings accounts and
education savings accounts
through ShareBuilder. For
details, go to costco.com and
enter “online investing” in the
Search box.