Last week, my daughter and I toured New York City.  A perimeter of security surrounds Wall Street. We snapped pictures of young people mounting the ferocious bull sculpture in front of Merrill Lynch. Some Hispanic youths nimbly mounted the bronze beast and demounted just as adeptly, but a Scandinavian almost impaled himself on a horn. We trekked down Stone Street, which dates back to Dutch colonization, and we watched a model for Stephen Seo pose in front of the pub Ulysses’. I asked the dark-haired male if I could snap a photo of him and my daughter. He obliged, and then the Asian photographer said with a smile, “That’ll be fifty bucks!” I replied, “You must be a New Yorker!” 

Later a young Asian man who craned his neck admiring the district’s skyscrapers asked us for directions. He was toting his luggage on wheels behind him. Between his trip to Washington, D.C. and his return to Taiwan, instead of staying at JFK airport, he had hopped a taxi to spend a couple of hours meandering the cement canyons. I asked him what he wanted to see in New York. He replied, with arms open wide: “This! Wall Street! This is my dream—to be here!” He was awed by the impressive array of historic buildings mixed in with leviathans of power.

In the small town where I raised my kids, textile factories have shut down, furniture makers have closed, and middle management jobs that were plentiful thirty years ago have gone “pouf” in this age of the Internet, consolidation, and overseas labor. In addition to wanting your kids to be affluent some day, you may want them to save and invest at an early age in case their jobs vanish in the blink of an eye. To guard against a depression, literally and figuratively, teach your child how money earns money. 

How can kids invest? They buy individual stocks as my kids did, investing in companies they recognize, such as Coca-Cola, Johnson & Johnson, and McDonald’s. Another strategy is to buy Exchange Traded Funds, called ETFs. Advantages include low-expense ratios and diversity (owning many companies). The first step is to open a brokerage account to buy ETFs. Remember that investing in stocks is for the long run. Over a couple of months, no one knows where the market’s going, especially television commentators. Even over a few years, there’s little certainty that markets will be higher. Yet, over five or ten years the market will most likely rise. Over twenty years plus, the market will certainly be higher, probably much higher . . . and you earn dividends while you wait. Remember, if you sell soon and withdraw money, some brokerages charge a withdrawal fee, but most don’t. 

If your child is under 18, you must set up a custodial account, in which you bear the responsibilities. Look for accounts that serve as savings/checking accounts and that issue debit cards. For funding, you need a checking account. You can fund it by having your child give you cash. Open a free checking account offered by many banks. Discount online brokerages are cheaper and typically easier to navigate than full-service brokers, and they now offer comparable research. Since you and they are new to investing, you want them to have telephone service as well.  

There are no guarantees in life! There’s risk in investing; there’s also risk with one’s employment. No one can forecast which jobs will last a lifetime and which ones will become antiquated. Just as it’s good for your child to be versatile in his training, it’s also wise to prepare for a rainy day. It’s important to choose stocks that pay a dividend, given that you have already chosen to invest in stocks. This spreads the risk among many companies and offers a variety of choices to allow a young investor to choose which investments he/she wants exposure to. For example, the S&P 500 Spider (symbol: SPY), will track the Standard & Poor’s Depositary 500, which consists of the five hundred largest companies in the U.S., while Vanguard Emerging Markets’ ETF (symbol: VWO) gives your little investor exposure to the rapidly growing economies of countries such as China, Brazil, and India.