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My son has always been a numbers kid. I wouldn’t say he is completely genius level, but he is pretty dang high on the scale of math nerd.
And I mean this in a completely endearing and loving way.
He is the kid for whom I must pause while reading a novel if any mention of money, statistics, or calculations appears. Otherwise, the next several paragraphs are lost on him as he silently calculates the answers and blurts them out a few minutes later. Better to give him the time.
He is the kid who laughs—belly-rolling, tears streaming down his face, uncontrollable breathing—laughs, at Mad-Libs jokes with ridiculous numbers inserted. “They had a million purple elephants!? That would stack to the moon!”
He loves to discuss statistics and probability; his favorite games involve calculating and money (Monopoly anyone?); he has earned the nickname “Money” at youth group. My son thinks and perceives the world from the perspective of numbers.
So, the logical step for a child who loves math is to introduce him to the world of investments. He loves money—not to spend, mind you, but to earn. And his propensity for strategic calculations lends itself to enjoying the stock market.
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Here’s how we got him involved.
Teach Investments to Kids
We started with the typical homeschooling family response. We bought books about the subject. I think researching and reading about topics of interest are the best things you can do for your brains, so of course my husband and I researched books and bombarded our son with reading materials. Our favorites:
- The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of by David and Tom Gardner
My husband picked this one out for our son. He has read it multiple times.
- The Uncle Eric series by Richard J. Maybury, including Whatever Happened to Penny Candy and The Clipper Ship Strategy
I love this series because it teaches all the basics of economics (Austrian method) as well as personal financial security and investment strategies. They are engaging and very thorough.
After arming our son with some background information about economics, money, inflation, investments, and all the other important details of a market economy, it was time to give him some opportunities to put his knowledge to work.
College Savings First
First, we opened a very benign, unimaginative, passive 529 college saving fund for him. We use TD Ameritrade, but of course many companies offer similar services.
A 529 College Savings Plan is designed to pay for educational costs for students at college, trade schools, or even K-12 private schools. Any growth is tax-deferred, and the range of expenses that qualify for tax-free withdrawal is generous, including tuition, room and board, books, and supplies.
Our son decided how much of his savings from his allowance plan would enter this account automatically every month, and we occasionally check its balance and return. Not very exciting for him now, but when he is ready to start higher education training, he will be glad it’s there.
And Then the Gamble
The real fun began when we decided we would open a Robinhood account for him. Now, Robinhood does not actually offer accounts for minors, called custodial accounts. Many companies do, such as Loved and Stockpile, but we decided not to go this route. Let me explain.
Custodial accounts are like trust accounts, legally in your child’s name but managed by you until they come of age. This may seem like an ideal situation, but in actuality, they can bite you. Any returns over $1100 will be taxed to your child (who technically owns the account) at the exorbitant Kiddie Tax rate, sometimes as high as 37%. Ouch.
Custodial accounts are also legally your child’s, so all the money is out of your control completely and they get it at 18 regardless of whether you think that’s a good idea or not. I don't know about you, but I’ve read enough historical novels about young adults blowing through their trust funds in a matter of months. I’d rather have some say as to when the money becomes his.
So, we opened a Robinhood account in my name, and give him free reign to do as he likes. That way, the money is legally ours, so we pay taxes at a normal rate and have ultimate control over it.
Robinhood has some advantages that make it a good option for those new to investing or wanting to have a less expensive “play” account. There are no fees or commissions for trading, no minimum balance requirements, and no minimum stock purchases. It’s a perfect set-up for learning and developing stock market strategy.
Since opening the account, our son has deposited $631 of his own hard earned cash (allowance, lawn mowing, birthday money) and chosen what he wants to do with it. Now, his returns are rather pathetic, but he has had pretty terrible market turbulence to contend with this year.
True to form, he checks the stock market levels daily, often multiple times a day. He watches particular stocks rise and fall, sometimes with no seeming rhyme or reason. He has lost money multiple times; he has gained a bit.
Overall, our son is learning that the stock market is volatile, a little like gambling. He is learning to watch current events for trends and news that could affect the market. We all know that it has been a roller coaster throughout the COVID-19 pandemic.
He likes to make predictions of stock behavior and quiz us on what stocks we think would be doing best from a particular grouping. He makes trades based on sometimes faulty thinking.
He remains a little dazed about losing money, but I think he is learning valuable lessons about investments that will stay with him throughout his life. Will he make a fortune through this? Maybe. Maybe not.
But it sure scratches his numbers nerve.
Tips to Get Your Child Investing
Here’s the short list plan to get started:
- Learn. Read books, guides, blogs, current events, anything to arm yourself and your child with the knowledge to succeed.
- Start Safe. Open a 529 Savings Plan for some passive investment income your child can use for educational costs.
- Be Brave. Allow your child to explore and learn with their own money, but skip the custodial account route for better tax rates and legal access.
Investing with your children should be a fun, empowering thing for them. When children and teens learn how money grows with time through compound interest, they may be more inclined to save as adults. And when you begin young, the accumulation grows that much longer. Give your children a hefty start with college savings plans and an introduction to the world of investing. They will thank you later.
Contributor’s opinions are their own. Always do your own due diligence before investing.
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