Teaching Kids About Investing
- Friday, January 03, 2014
My journey to becoming a stock market guru (tongue planted firmly in cheek) started with a single share of Eastman Kodak stock. I don't remember receiving it, so I'm guessing my grandparents bought each grandchild a share either when we were newborns or at least when I was still very young.
In the 1970s and 80s, Kodak and Xerox dominated the business landscape of Rochester, NY, where I grew up. My dad worked for Xerox during the first half of my childhood and Kodak during the second half. Lots of my friends' parents worked for them, too.
The newspapers I started delivering around 5th grade always led with the business section with news concerning Kodak and Xerox. And at 6:16 p.m. every night, immediately following the weather report, the local TV news would display the daily change in Kodak's and Xerox's stock prices. Given the heavy local emphasis, Kodak stock was an outstanding gift to give a kid growing up in Rochester.
The other outstanding teaching aspect of Kodak stock was the fact that it paid a dividend. Every quarter, a Kodak check would arrive in the mail with my name on it. Nevermind that these checks were typically for 25 or 50 cents. It was free money! In the mail! For me! I don't specifically remember tying this "free" money to the performance of the company, but I'm sure my parents explained it was because I owned a tiny piece of the company and I was sharing in its profits. (I never did make the connection that as a part-owner of the company my dad worked for, I was technically kind of his boss. Probably just as well.)
Kodak stock had some interesting stuff happen when I was in my teens. There were a couple of 3:2 stock splits along the way. Given that my single share couldn't become 1½ shares, Kodak generously sent me the extra half share in cash. Those were attention-grabbers: $20-$25 checks at ages 12 and 15 were definitely welcome!
From the lows of the late 1970s to the highs of the late 1990s, Kodak stock went up about four-fold. I learned a lot of lessons about business and the stock market through my early interaction with my single share of stock. It spurred questions that gave my parents the opportunity to discuss issues with me that may have never come up otherwise. Plus my Kodak stock fed the local economy by providing me money for candy and Slurpees at the local 7-11.
I have no idea how my grandparents went about purchasing that single share, but today it's easy for parents or grandparents who want to do something similar. Companies such as OneShare.com make it a breeze to buy a single share of company stock, and they specialize in the types of companies kids like, such as Disney, Dreamworks, Nintendo, Build-A-Bear, and so forth.
A nice option that OneShare offers (that I didn't have) is an actual stock certificate. They frame it up nicely (which, of course, you pay for) for Junior to hang on the wall. But again, if the goal is to stimulate conversation and interest, you could do worse than an intriguing stock certificate with Mickey and the gang hanging in their bedroom and a dividend check arriving quarterly in the mail.
What I'm Doing with My Kids
Given my positive experience owning stock as a kid, you might expect my own kids all have stock certificates hanging on their walls, right? Wrong. It probably would have been a good idea, but it didn't happen. While that's bad news for them, it's good news for you because you get to hear about a different idea I've been using with my oldest child to teach her some basics of investing.
In addition to owning a share of stock, one of the other great teaching tools of my childhood was the traditional passbook-savings account. But today, with savings-account yields near zero, trying to teach a youngster to save using a bank-savings account is about as de-motivating as it gets. Because of this, I moved my daughter's online bank account to LendingClub.com when she hit her teen years.
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