Two things are important when it comes to teaching a child about investing. First, it is important that they have ownership in the investment. Second, they need to be able to watch it and potentially make decisions concerning whether to buy or sell. The best way to teach is in real time. By doing so, they start to see how stocks really work.
Well, that process has its’ challenges. First, you need to buy at least 1 share of stock. Depending on the stock, that could be hundreds of dollars for your teaching tool. Plus, they would only have ownership in one stock. Second, transaction costs would eat you alive.
What if you could buy $25.00 worth of Apple Stock? What if it only cost you $3.74 to make that purchase? Now, you can give ownership of a company like Apple and your child can track it in real time. What is even better, you can give it in the form of a gift card.
Let me introduce to you www.stockpile.com. My business partner told me about this site and I fell in love with the concept. Through this site, you can purchase stock as a gift and give that gift to the recipient in the form of a gift card. If the recipient of the gift card doesn’t like the stock or the idea in general, they can sell the stock for cash, exchange it for a retail gift card, or exchange the stock for another stock.
This works great as a teaching tool. Let me give you an example. For $ 100.00, you can build a portfolio of 4 stocks for your child. You could buy $25 of Apple, Google, Nike, and Twitter. The total investment would be $100 and the costs (as I understand it) would be $14.96. Now, you as the parent are custodian of the account. However, you can give your child log-in credentials. They have their own brokerage account set up and they can track their investments. You can add cash to the account straight from your back account.
The best part is that they can fill out a trade order to buy or sell their stock. They fill it out and then the trade order comes directly to you as the parent. You then approve it and the transaction goes through! Obviously, they aren’t going to give a minor the ability to trade their own account unsupervised.
You can build their stockpile account by giving gifts of stock for birthdays and for special occasions. You can even set it up as a reward system for grades! Of course, this also makes a great gift for your child’s friends for birthdays as well as that hard to buy for person in your life.
You can get the gift cards online or they actually sell it at major retailers.
This is by far the best way to teach kids about investing that I have ever come across.