CNN Money recently highlighted a Midwestern family’s effort to teach their kids about investing.
They did things differently than you may have heard in the past.
Rather than let the savings she and her husband had built for the kids sit and earn meager returns, Angie Ellerbroek took each child’s savings account and invested it in the stock market.
I love Angie’s proactive approach to teaching her children about money. Since this was not money that her children needed right away, she assumed (and I believe rightfully so) that it should be invested in something more than a bank account.
Kids Can’t Learn If You Don’t Teach…But Teach The Right Stuff
I felt like a cheerleader in Angie’s corner because she clearly didn’t suffer from investing fears like a number of my clients. I was cheering and routing her on–
–until I saw what she did.
She decided to take each savings account and invest it in one stock that the children knew about, so her son who likes computers she invested in Apple, the daughter who likes movies owned Disney and the other daughter who apparently got sick a lot, owned Honeywell because of the Honeywell thermometer used to take her temperature.
Oh Angie…you had me at hello and then you lost me at your diversity play or lack thereof. One stock each and not the same one? It was like Sophie’s choice but with stocks.
Fortunately over the last few years all of these accounts are up between 70 and 140% (these were the numbers quoted in the article, I am not really sure how they add up) but this story could have had a completely different ending with other stocks.
Fortunately, according to the article, Angie has further diversified her kid’s portfolios, although, it does not really go into detail so maybe now the son owns Apple and Microsoft or some other equally poor pairing.
What was more interesting than this story, though, were the comments that followed and the number of opinions people had on Angie’s decision. If you have time, I highly recommend them for entertainment purposes alone.
Where I wish Angie would have diversified the portfolios a little and maybe done the same thing for each child, overall, I am thrilled that she took this leap with her kids.
How To Teach Kids To Invest
The best way that you can actually teach your kids about investing is to invest. It’s hard for kids to understand the concept of a stock and what it means to them, let alone the power of reinvesting dividends. Believe me, I have tried this with my son using anything from Pokemon cards to marshmallows to try to explain it, and he still doesn’t get it.
If kids can actually watch a portfolio grow over time, though, they will not only gain comfort with investing, but they will become believers from an early age.
How old were you when you started investing? If you had to pick one stock for a portfolio, which stock would you pick?
Photo: Steve Depolo