Investing for children
Terry,
I’ve tried to expose my kids to concepts of investing as they’ve grown. I’m happy to see them want to understand this better and do the right things as they grow up to prepare for the future.
They are both starting to get jobs and save on their own and have asked if they can open their own brokerage accounts (with my oversight). The objective would be to start putting savings money in a S&P500 index fund or something like that (not necessarily individual stocks at this stage) versus just having a savings account earning nothing.
I’m happy to do this for them but want to make sure I’m not missing anything first. They are 14 and 16 and both of them have well funded 529 plans already. I realize the money is theirs at 18 and could impact any financial aid they might try to get (though based on the fact that they have well funded 529’s and my annual income, etc., I’m not sure we would even qualify to start?). I’m considering opening an online custodial account (Schwab, Fidelity, TD Ameritrade, etc.) in each of their names. Is there anything I’m missing or should consider before I do this?
Terry Says
Well, my immediate reaction is always the two points you have covered: the impact on financial aid and the fact that the money is theirs at age 18. So as long as you supervise carefully, I see no problem with this. BUT you might want to start small. Go to www.Stockpile.com to open an account. They can invest with smaller amounts of money and buy partial shares — sort of as a test program. And they won’t get caught up in speculation because the orders are executed after the close of business, making day trading almost impossible! But they can do research, pick stocks, start with a small amount of money, and the cost is minimal.
