Want to introduce investing to your kids? Owning a share of stock is a good place to start as it will likely inspire them to track performance and allow them to experience risk and rewards through the real-time ups and downs of the market.
Why start with one share of stock vs. a mutual fund or other kind of investment? Investing in a company you know, possibly one that you frequent and are a loyal user of their products, makes that investment personal and a lot more interesting. A more provocative investment will capture and keep the younger investor’s attention and hopefully, inspire them to add to that initial investment and even invest in another company.
One way to start is to buy shares direct from the company.
When you hold the shares, you actually own a piece of the company. You can make money on a stock if you sell it for a higher price than you paid for it. A company may also pay its shareholders dividends. Since chocolate seems like a good place to start – take a look at this link from Hershey. It explains the concept of DRP (Direct Stock Purchase) Plan, in nice detail: The Hershey Company (click on the “+More” tab, then select “Direct Stock Purchases” from the drop down menu)
How do you help your young investor choose a company? Here are a few tips to get them (and you) started on that discussion:
How Do You Choose a Stock to Buy?
- Pick a company you like and respect or admire.
- Learn more about how this company earns money and if it is profitable.
- See if you can find out the company’s plans to grow bigger and better.
- Find out if the company has any competitors, and if they are better than the competition.
- Make a plan to keep track of the company’s profits and stock price.
Remember to always research any company before you purchase and include your child in the process so they can learn as you learn.
More tips like this can be found in our new book – O.M.G. Official Money Guide for Teenagers.