Good Financial Cents -Jeff Rose Certified Financial Planner and Investment Advisor, Carbondale, Illinois » Kids and money

How to Buy Stocks for Your Kids

Miranda Marquit — Thu, 07 Jul 2011 12:06:03 +0000

As a parent, it is natural to want to give your child the best possible start, especially when it comes to money. You want to teach your children good money habits, and them develop good practices that will allow them to succeed financially. In many cases, this is about more than just teaching budgeting 101 and how to avoid credit card debt. Many of us also want to help our children learn the ins and outs of investing.

Buying Stocks for Your Kids

If you want to teach your children about investing, it can be a good idea to buy stocks for them. Minors can’t buy stocks, so you will have to do it on their behalf. You have two options when it comes opening an account for your children:

Guardian Account: You retain ownership of the account, and gains are taxed at your rate.
Custodial Account: The child owns the count, even though you are in control of it. Gains are taxed at the child’s tax rate. Once the child reaches 18 or 21 (depending on where you are), the assets come under his or her control.

You can decide what type of account would work best for your child. If you choose a custodial account, it is important to understand the restrictions that come with managing your child’s money until he or she can do it.

Once you have determined what type of account you will open for your child, it’s time to set up the investment account. You can usually open a guardian or custodial account at many brokerages, including online brokerages. Find out what minimum requirements come with opening an account, and find out what other information and documentation you might need to open an account on behalf of your child.

Helping Your Child Choose Stocks

Once you have an account set up, it’s time to help your child learn about choosing investments. You can look at companies that your child might be interested in, such as Disney, or Coke. Talk about what makes a good investment, and discuss different options. If your child is a teenager, you can discuss the merits of dividend stocks as well, allowing him or her to begin learning about income investing. You can also look for Direct Purchase Plans offered by some companies, allowing you to save on transaction fees in some cases.

Consider funds as well. There is nothing run introducing a teenager to the concept of index funds and exchange-traded funds. Talk about the costs associated with funds, as well as the instant diversity that might be available in some cases.

Your child can go on a practice run, it you would like. There are several web sites and smartphone apps that allow you to put together a hypothetical portfolio and track its performance. If you want, you can encourage your child to track investments he or she is interested in, just to get an idea of how they are doing. Read up on the companies of interest and encourage your child to consider various fundamental factors in additional to the technical aspects of how stock prices rise and fall.

Once your child is more confident, you can begin making stock purchases on behalf of your child. Letting him or see that sometimes there are losses as a result of a poor decision can be part of the learning process, but your involvement should help prevent major investing mistakes.

Note from me……

Buy Stock Through the Company

When we had our first son I was excited to buy some stock for him in a custodial account directly with my brokerage firm. I bought him one share of Nike and one of Under Armour and was able to request the certificate to be mailed to me. I was getting ready to do that again for our second son, but learned that our firm (and many others) don’t do this any more. You have to call the custodian of the company (a popular one is Computer Share) and see if the stock available.

Wanting to buy some different stock (I was looking at Google or Apple) I was able to get their contact info from my back office. I was disappointed that my first pick, Apple, no longer issues stock certificates – boo! So if you’re an Apple fan like myself and want to get the certificate for a loved one, you’re outta luck. I know. I’m saddened, too.

I’m still trying to figure what stock to buy. I’ll keep you posted…..

29 Good Reads About Kids And Money

Jeff Rose — Fri, 13 Mar 2009 14:33:22 +0000

Earlier I shared my two cents on teaching your kids the value of money management. Since my son is only 19 months (pictured above), I don’t have much “real world” experience on teaching him the fundamentals of managing money. Sure, he can stick coins in his piggy bank all day long (actually a good tool to keep him occupied for a bit) and toss every cent out of daddy’s pocket in any fountain, but I don’t think there is any real lesson being taught there. Maybe one day, right? I decided to reach out to the personal finance bloggers to share their experiences with kids and money. If you are looking for a site that covers nothing but the topic check out Kids and Money. Great site with plenty of good info. Okay, let’s first start with some basic principles that anybody can implement.

Educated Your Kids On Personal Finance
Teaching Kids About Money
8 Fundamental Money Lessons for Kids
Teach Your Children The Four Pillars of Money Management
Teaching Kids The True Value of Money

Preparing For Your First Child

It’s so exciting getting the news that the first one was on the way. There were so many emotions that day; but, for anybody that has kids, you know that is just the beginning. If you were like me and clueless how to be get prepared for your first child, here’s some good reads to give you a good heads up. If these don’t help, you can always watch TLC or John and Kate Plus 8.

The Baby is Here!

Remember those emotions I was talking about earlier? Wait until the big day that your child arrives. Reflecting back, I don’t know how I didn’t pass out. I have to admit, when it comes to all those birthing videos, I got kind of nauseous. Call me me weak, I know. But it seriously was concern of mine. I’m glad I have a wife that’s solid as a rock. Then when he arrived and I got to hold him for the first time it finally sinked in…..I’m a Dad! When the little runt finally arrives, here’s some good info to get you on track.

My Baby Is Now a Toddler

It’s amazing how quick they grow. One day there just laying in the bassinet cooing away, the next they are climbing on the fireplace jumping off for fun. When they start getting older is when you can start to lay the framework for strong money principles.

Lessons For Your Kids

Kids are a sponge soaking up everything around them. I remember a couple years ago I was behind a mother and her young daughter waiting to check out a department store. When it was their time to pay, the mother handed her daughter the department store credit card so she could hand it to the cashier. I’ll never forget that sight and how much it troubled me. It’s never too early to teach your kids to appreciate the value of a buck. Don’t ever take it for granted. Here’s some good tips to get you going.

Your Child Is All Grown Up

There is going to be a day when I have to realize that my little boy is all grown up. First there will be high school, then his first car, and then off to college. Before I get ahead myself let’s come back to real time. Here’s a good collection of posts addressing when your “little one” becomes a “little adult”.

Thanks for everybody that participated! It was a blast reading all these and getting a chance to showcase all these great reads. If you have kids, what are you doing to insure that they grow up financially responsible?

Photos by Jason York Photograpy and my wife Mandy Rose.

Securities offered through LPL Financial, Member FINRA/SIPC.

Teaching Kids The Value of Money Management

Jeff Rose — Thu, 12 Mar 2009 11:37:11 +0000

Kids and Money

As my son just turned 18 months, he’s still a little too young to understand and appreciate the value of money. But it’s still on my mind about how I’m going to teach him to appreciate and value the importance of money and money saving tips as he gets older. While I’m sure that things are destined to change as time progress, here are a few of the things that I feel will be beneficial when he is old enough to appreciate:

1. Show Them What You’re Working With

Currently my wife and I used a basic Excel spreadsheet to keep track of all our monthly expenses and our monthly cash flow. I think it will be truly beneficial to sit down with our son to kind of show him what we have coming in versus what we have coming out. We would then show him what we contribute towards our savings account, what we tithe, and also retirement savings. That way we show him that every dollar that comes in is not spent, and a good chunk goes toward either the savings account or saving for his college education.

2. Get Techy

Nowadays there are many money education sites that can teach kids the basics of money. One example that comes to mind is kids.gov. Before they plan to work for money, they must be comfortable with the real thing. They need to touch dollars and coins, count them, stack them and learn that they are concrete things.

When they become a little more advanced, you could even consider games like the Stock Market Game. Kids are able to invest $100,000 of fake money and purchase securities at real time. That way they could really see how the market really works.

3. Walk the Walk

Kids watch more than they listen to lectures. You might be the greatest money manager in the world, but if you don’t show and tell your kids on what you’re doing then they can’t learn from you.

4. Make allowances count

Growing up my parents gave me basic chores of just mowing the lawn and taking out the trash, and the only thing I really got paid for was the lawn. I think, though, that by incorporating other weekly tasks for my son to do, will give him both a sense of responsibility, and also an appreciation for the money that he earns for the task that he does. Go beyond spending money. Require kids to save, invest, and donate. They need to learn that money isn’t just for spending.

5. Play Match Maker

Just like a 401k match, you can add to their savings total. That should give them an incentive to fill their piggy banks. Don’t forget about the grandparents! Let them match, too.

6. Be Nice, Just Not Too Nice.

Even if you can afford to give your kid a comfortable allowance, don’t. By about age 12 kids should do small paying jobs for friends or family members. At 16 they’re capable of getting summer jobs and saving for their own expenses.

No matter how you do it, teaching your child the value of money is imperative to their financial success. Give your child the tools they need to be become a financial champion!

Success!

Photos by Jason York Photography

Teaching Kids About Money

Jeff Rose — Thu, 18 Dec 2008 15:43:59 +0000

Common sense answers to questions on personal finance by Joe Plemon

Q: My husband and I want to teach our children about money to help them avoid the many mistakes we have made. Can you give us some tips?

A: Great question! I suggest you focus on two money concepts: where it comes from and what it should be used for.

Work For It, Appreciate It

Because money comes from work, I don’t recommend giving children allowances. Instead, create age appropriate chores. For very young children, cleaning their room probably involves picking up a few things (with lots of help and “atta-boys” from Mom and Dad). At this age, pay your child immediately so he makes the connection between work and money. As the kids get older, keep a chart of chores and mark them as they get done. Pay them accordingly each week. Can this become tedious for you? Yes, but you are imparting some great work ethics.

Be Their Financial Disciple

Now that they are earning some money, you need to teach them how to use it. I recommend that you label three envelopes as SAVE, SPEND and GIVE AWAY and show them how to divide their earnings. You can create great teachable moments when you take your child to buy something she has saved for. As she pays the cashier with her money from that SPEND envelope, she realizes how much work it takes to buy a certain item. She even learns about taxes. At an appropriate age (12-15), help them open their own checking account and take responsibility for it. (NEVER give them a credit card!). Put money you would have spent on their clothing into the checking account and let them purchase their own clothing. My kids learned all about thrift stores in their high school years. Your children will thank you some day, and you will enjoy watching them handle money responsibly as they grow through their teen years into adulthood. I wish you the best as you implement these ideas into your children’s lives.

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Plemon Financial Coaching