Getting kids started, and more importantly interested, in trading is a great first step towards their future financial well-being and independence. We discussed setting up their first account using Stockpile here.
Once their account is open and funded it’ll be time to sit down with them and choose some investments. My kids were eight and nine when I opened their Stockpile accounts, and I’ve found engaging them in the process of choosing a handful of stocks they know and understand is more important than focusing on building a well-rounded diversified portfolio at this age. Investing in some obscure biotech firm is not going to interest them at all. And frankly, at this age, having a diversified portfolio is meaningless. They’ve got thirty, forty, fifty years to invest and build that sort of portfolio, and getting them started in this way will lead to them knowing exactly how to invest as they get older.
For now, let’s keep it fun, spark their curiosity, and encourage participation.
With that, let’s point out a few stocks that you can probably use to get your child started on the right financial path.
It doesn’t get any easier than Disney. No matter your child’s age they can likely relate to Disney through characters they watch on screen, or family vacations to the theme parks. As an added bonus, DIS pays a small dividend. It’s always nice to collect a dividend, but even better is the ability to then teach your kids a lesson about what a dividend is and how it can help their money grow.
McDonalds (MCD) or Taco Bell (YUM)
There aren’t many kids who haven’t had their fair share of fast food burgers and tacos. These stocks are an easy way for them to make the direct correlationbetween their investments and their ownership in the company. Next time you find yourself in a McDonalds talk to your kid about it. “Well, since you own a piece of this business what do you think of it? Does it seem like a good business? Are there a lot of customers? What would you change to make it even better?”
Target (TGT) or Wal-Mart (WMT)
Here’s a no-brainer. What kid hasn’t been dragged up and down the aisles of Walmart? What kid hasn’t stood staring at the toy aisle in Target? These are also good ones for carrying on discussions about the pros and cons of the business as you walk around picking things off the shelves.These are also dividend payers so when they get that little deposit in their accounts you can talk about that, too.
Everyone knows Amazon. Discuss how the company has expanded. Point out the delivery trucks while you are out and about. Talk about how the company secures user loyalty with programs such as Prime.
Ford (F), GM, or Tesla (TSLA)
For those kids who are interested in cars, these are all great. And seeing them on the road and in the parking lots every day can spark all sorts of conversations as well.
This is a great one to discuss quarterly earnings reports. Explain how dependent this company is on growing its customer base. Every quarter they tell us their subscriber numbers and you can show them how this effects the stock price behavior.
Nike (NKE), Under Armor (UAA), or Lulu (LULU)
When your kids put on branded clothes they are walking advertisements for these companies. Talk about that. Ask them if they think that’s important to a brand’s success. Talk about the clothes they are putting on. Why do they like them better than others?
Mattel (MAT) or Hasbro (HAS)
Toy companies are easy. My son is a big Hot Wheels fan, to the point that he knows just by picking up a toy car if it is Hot Wheels or some other brand. Good chance to talk about the quality of a product and how that is important to them. But does good quality necessarily translate into good stock performance? Time will tell.
Activision (ATVI) or Electronic Arts (EA)
Video games aren’t going away any time soon. In fact, this new generation is playing games in stadiums filled with thousands of screaming fans. This is an easy stock to spark conversations about a game’s popularity and how a new release can jolt a stock price.
Bank of America (BAC), Wells Fargo (WFC) or Your Bank’s Stock
Your kids have likely gone to the bank or at least stood next to you as you pulled money out of an ATM. Talking to them about how banks make money is a great topic. When an 8-year-old begins to understand earning interest it opens up a whole new world regarding money.
These are just a few of the many stocks you can use to get your kids started on the investing path. There are tons more, of course. Walk around the house, point out your favorite products, and go online to see if they are publicly traded. When they aren’t, that’ll spark another conversation about public vs. private, and why a company might choose to go public in the first place. You’ll quickly find that the possibility for conversations around finance/investing are endless.
Get your kids started investing today. The importance of this decision might not be immediately apparent, but as the years go by and your kids develop good spending habits and deposit a chunk of their first paycheck into their brokerage account, you’ll know then how important it really was.