Somewhere in my teens, I’m guessing in late middle school, my dad sat me down and tried to teach me about compound interest, the stock market, investing, and blah, blah, blah. I don’t think the problem was with the information or his delivery, but with the timing. I simply wasn’t that interested in the subject. In fact, I think he was years too late.
When our daughter turned five, I figured it was time to start getting her interested in investing and learning about owning publicly traded companies. Still, she was only five, so I asked her what brands or products she really liked. Slowly, I began to explain that people can own a part of a company by purchasing shares. Any time the topic of investing came up, I kept it simple and only covered one point. After a few chats, she decided she wanted to own a part of Skechers because they made her favorite shoes and she was passionate about the brand.
I gave her USD 250 to invest and she watched as I made her purchase with our online brokerage account. I’m sure she didn’t fully understand what was going on, but after that, she knew she owned a little part of the business. Over the past three years, from time to time, I would talk with her about the company and reinforce the fact that she had a vested interest in the performance of the company. Every few months, I would pull up the stock performance and show her what was happening to her investment.
Fortunately for my daughter, her first stock pick has been quite successful to date. She happened to buy the shares when Sketchers’ price had dipped down and the company has been firing on all cylinders ever since. Her initial USD 250 investment is up nearly 700 percent today and valued over USD 2,000. This year we even printed out the first 10 pages of the annual report so that she can get a stronger sense of what her money is helping accomplish; the first ten pages contains lots of color photos and simple graphs. It is also a great way to put reading and math to work too.
After three years of building up her vocabulary and awareness of investing, we finally decided to go for another stock pick (Disney) and our conversations are getting longer and more nuanced. I don’t know how her mini portfolio will be doing by the time she is a tween, but I am certain she will be more interested in investing and finance than I was. She will also have a tremendous leg up on achieving financial independence.
Photo: epSos.de (Flickr)
