If you want to kickstart your kids' interest in investing, quietly
parking some money in the market on their behalf just won't do the
trick. Fortunately, there are lots of easy ways to help your kids learn
about the stock market.
Most kids are interested in money -- namely, how they can get more
of it. That serves as a good initial motivation to teach them about
investing. Once they get their feet wet, they might just realize that
they enjoy the world of finance.
Still, before you start plunking your kids' allowance into stocks,
it's a very good idea to play and experiment with investing. Here are
some activities you and your kids can do together.
Build a mock portfolio
Have your kids make a
list of the companies that interest them most. They can get ideas by
looking in their closets, in their classrooms, in the mall, on TV, or
any number of other places. Search for companies your kids know, such
as Disney (NYSE: DIS), McDonald's (NYSE: MCD), Coca-Cola (NYSE: KO), or Abercrombie & Fitch (NYSE: ANF),. Write down the names of 10 to 20 interesting companies, then record the current stock price of each.
Every day, week, or month, you can check the prices together, see
how the stocks are doing, and record the latest prices. (Consider
setting up your mock portfolio in Motley Fool CAPS,
which will automatically track your picks against the market's
returns.) Foolish investors focus on long-term performance, so
day-to-day or month-to-month stock price movements aren't terribly
important to us, but it can still be very interesting to see how stock
prices move.
Follow your stocks together
Along with
updating your portfolio's prices periodically, you can scan newspapers,
magazines, Fool.com, and other websites for stories about your
companies. Is McDonald's promoting $0.75 burgers? Will this help the
company by bringing in more sales, or will it hurt by decreasing the
total profit? And how did the stock market react when it heard of this
announcement? Did the stock go up or down?
Do some math as you follow your stocks
Pretend
that you bought 10 shares of a company's stock. How much did it cost
you? (You can include broker commission costs, if you want to be more
precise.) What are the shares worth now, a few months later? How much
money have you made? What return percentage is that? Following stocks
is great way to develop basic math skills.
Consider school subjects other than math as you explore stocks
Investing
can relate to most subjects in school, and give kids a bit of a new
perspective on their studies. There's obviously math involved, since
they multiply share prices by how many shares they want to buy, and
perform other calculations with numbers from annual reports.
But stocks can also teach history, as your kids examine how venerable companies like AT&T (NYSE: T), General Electric (NYSE: GE), and Ford (NYSE: F) got to where they are now. (Our Foolsaurus
has profiles and brief histories for many of these companies.) Science
can also come in handy when researching today's technology and
health-care companies. As for English, aside from the reading involved
in research, it's always a good idea to write out exactly why you are
buying a particular stock, and why the company seems so promising.
Start actually investing
Once you've become
comfortable with the idea of investing in stocks, it's time to consider
buying shares. Why not include your offspring in the process? You can
open a joint brokerage account, acting as its custodian, but you don't
have to go that far. If you're about to buy 100 shares of a stock, and
your child wants to buy a share or two him- or herself, you can just
place the order together, adding their shares to your own. Just keep a
good record of which shares belong to whom. Once your child turns 18,
she or he can open a brokerage account, to which you can transfer the
shares.
We've just scratched the surface of all the ways you and your kids
can explore the stock market together. Even if your child doesn't end
up as the next Oracle of Omaha, the learning process should prove
rewarding and fun for parents and kids alike.
Source: Motley Fool - http://tinyurl.com/yzgnmts