Investing for Kids

Kids are capable of picking up on the value of money at a very young age. Strive to give your kids a basic understanding by the time they’re ready for elementary school.

• Start with a piggy bank. Help kids decide on short-term savings goals that are easy to achieve.
• Take them shopping with you. Use this time as an opportunity to talk about making good choices and looking for value.
• Teach kids to make change. Play a game where you are the customer and they are the cashier.
• Refrain from buying everything they want, and explain why. Perhaps your family has other savings goals, such as a vacation. This may also be a good chance to start talking about your family’s value system.
• Consider helping your kids earn and save money to buy a special item. They’ll appreciate the item more if they’ve worked toward its purchase.

At this stage it’s more important for kids to fully grasp the concept of saving, but you may also be able to slowly introduce the concept of investing.

• Provide kids with an age-appropriate weekly allowance. One rule of thumb is a dollar for each year of age, starting at age six.
• Set up guidelines for regular savings using a very simple budget. Kids don’t have mortgages or other monthly bills to worry about, so it’s reasonable to expect them to save as much as 50% of their allowance.
• Open a savings account for your kids at a local bank. They can watch their money grow and begin to grasp the concepts of interest and return on investment.
• When you check your own stocks, show your kids some companies you have invested in. Kids may find familiar names like Apple and Disney particularly interesting.

As you begin to introduce more complex investing concepts, remember to keep things light. Even though investing is a serious topic, it’s important to include an element of fun to maintain your kids' interest.

• Encourage your kids to save more by offering a dollar-for-dollar match.

• Introduce the free 10-minute courses from BB&T and Morningstar® on Understanding Your Investment Options and Managing Your Investment Portfolio. Start with the 100-level courses for an understanding of basic terminology and concepts. Preview the courses in advance to make sure your child will be comfortable with the subject matter.

• Discuss the ways world news and events can impact various investment options. For example, if a banking crisis occurs in Europe, observe how stocks fall as investors seek shelter in the bond market.

• Set up a simulated portfolio via online resources such as Virtual Stock Exchange Games, provided free of charge from MarketWatch in association with the Wall Street Journal.

  A simulated portfolio is a fun, no-risk way to learn about investing, the different kinds of investments available, and the possible risks and rewards involved. Consider making it a game in which other members of the family set up simulated portfolios as well—the highest performers get bragging rights!

• Kids at the older end of this range, especially those with part-time jobs such as babysitting or lawn mowing, may be ready for a pre-paid debit card or a student checking account. If so, it’s essential for them to learn the basics, including:
  • How to make deposits and withdrawls
  • Using online banking to track progress
  • How to balance a checking account
  • The difference between available balance and posted balance
• Encourage your child’s teacher to consider adding The Stock Market Game™ to the curriculum.

This is the time to expand your kids’ financial responsibilities to include discretionary spending for items such as clothing, entertainment, mobile devices and transportation expenses. Discuss the cost of college and explore more advanced investment topics as they transition to adulthood.

• Open an IRA for your kids. If they have earned income, they can contribute $5,000 or an amount equal to their earnings, whichever is less.

  The Wonder of Compound Interest

• Teach them about the perils of credit card debt and the difference between a straight interest rate and an APR. This is a good opportunity for a lesson about interest: it’s great when you earn it but not so great when you have to pay it. Prepare college-bound students for the bombardment of credit card offers coming their way.

• Introduce the concepts of credit scores, credit reports, and the importance of building a good credit history.

  Build a Solid Credit History

• Help your kids create a more detailed budget.

  The Importance of a Budget

• Before your kids make the transition from your residence to one of their own, discuss the pros and cons of renting vs. buying based on their particular situations.

• Caution your kids against the “set it and forget it” mentality of investing. Help them establish a schedule to review and rebalance their portfolios at least once a year. At some point they may want to consider an investing relationship with a BB&T Investment Services, Inc. Investment Counselor.

• Keep the conversation going. As your kids make their way in the world and encounter choices on issues like company retirement plans, home buying and college savings for their own children, they’ll continue to benefit from your experience and wisdom.

  Starting on the Road to Financial Security