Young Sons and investments

[mgatepi]

Hello All,
Taping into the PP Brain trust here!

I have 3 young sons (teenagers) for which I want to set up individual investment accounts. I plan to deposit a small amount in each, maybe $500, and let them build from there. My hope is to instill the ideal of investing and managing money at an early age. And hopefully they work together to build their accounts.

Now my problem...where do I set these up? I am thinking an on-line service such as Scott Trade or Etrade or ???

Has anyone ever done this and what service is recommended?
Thanks!!!
mg

[krystar]

honestly don't think $500 is gonna get u much in investing. the trading fee's will be so large relative to the investment amounts if they try to diversify their portfolio.

how about having them do virtual investment managements on updown.com to teach em?

[Seahawk]

You can do a composite of real money and fake money: For the real money, set up separate savings accounts for each at a local bank. Show them simple interest, compound interest, etc.

Then, give then each a set amount of fake money and teach them how to invest in stocks, mutual's, etc.

My Dad did this with me, so did my Mom. It was a much simpler time, but the lessons are still valid.

IMHO, the best thing you can teach your children are the basics of financial management, not just investing. The simple lessons of what percentage(s) of gross and net income to spend on life are as apt today as they ever were.

[Steve Viegas]

CBS marketwatch will allow you to build fake accounts and watch what happens with them. They let you fix things like commission etc. to make it as real as you like.

You can set up a competition between the kids.

[PorscheGAL]

Where are you in the manage money talk? I think they should have a good grasp of managing a budget and saving before the introduction to trading. This would also be an opportunity to talk about taxes. Although with a $500 investment they will probably not reach the threshold for reporting or paying taxes they should be aware of how taxes would effect them if they did make enough money to file taxes. Kudos for you for trying to teach your boys all aspects of financial life.

I would suggest you require them to track the stock after they sell it. I think it gives a good perspective of how stocks should be looked at from a long term standpoint. For example: I bought Coke at $36 a share and sold at $42 a share. Not a bad lift but if I had waited to sell another 6 months it would have hit $58 a share. Much better.

That being said, I have used both Scottrade and Etrade. I like Scottrade better. They are easier to use by a long shot. Their fees are less. Scottrade allows you to deposit money straight from a checking or savings account into your Scottrade account. When you buy or sell you get an immediate confirmation. I was able to walk in my local Scottrade office and get a check drawn off my account at any time with no extra cost. Etrade would tell you it will happen sometime that day. For me, the sell would always happened when the stock was the lowest price so I made the least profit. Getting a check from them was not as easy as it should be and there is a fee for that.

[Tervuren]

I had a hankering for a 944 that was installed at the eve of my teenage years. I worked and saved for one, and ended up over achieving on the saving part, put most of what I had into a mutual fund @16, did not touch it, and got my 944 later.

That account has had a $100 a month added to to it on top of the initial amount for ten years now. May come in handy later in life. Originally I wanted it for a Ferrari, but I really don't want a Ferrari anymore. It will probably go unused for a long time. I don't keep track of it. I was curious if I *could* buy the Ferrari I'd been saving for, and opened a statement last year. The Ferrari 348 has gone down in value, and the account has grown quite a bit. Not enough in that account to buy a 348 though.

[RWebb]

Vanguard, unless for some reason you want them to earn about individual stocks

do a search here in OT on that term

[mgatepi]

Much good advice here! Thanks to all!
This will be just a start and my hope is this will encourage savings and also develop an understanding of the markets and of course the tax consequences eventually. I know $500 is nothing to really start with but to them its alot of money. I am also planning on creating savings goals with rewards of $$$ once they reach set amounts.

Perhaps I will start them with the "fake" accounts....for a period of time prior to.....
I will give updown a try tonight.
Thanks again.
mg

[eauboy]

Sharebuilder is a good option for trading securities. $4/automatic trade isn't too bad compared to other places:

Mutual Funds - 100% No-Load | ShareBuilder.com