Please help my son...very basic question

[Cubswin]

Does your son know anything about compounding interest? I think 9 years old might a little too young for an education on stocks. Why not depsoit some money in an online savings account earning 5% interest and explain to him how interest works. Sit him down when you deposit some money into the account each month and then show him the interest he has earned. He will love watching 'his' money grow each month. Id save the stock education for a few years down the road.

[Scorpion Man]

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I don't mean to insult anyone. It's my belief that the average 9-year-old cannot beat the market, that's all.

How would he choose not to pay a commission?

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Gull....with all due respect, you are missing the point. This is not about beating the market. This is about developing an interest in the market. There are also a lot of lessons to be learned about math and nascent business instincts. There is also to be learned, in my opinion, one of the most important lessons of life in terms of building wealth---delayed gratification. How is this for a 9 year old who loves gameboy? Just had a birthday, among other things got $150 of gift cards from various people to Target, etc. I offered, no pressure at all (seriously...no pressure...told him it was just if he wanted, it did not matter to me either way), to cash out any of the amount he preferred to save instead of buying toys. He chose half to put towards stocks. I was proud of him for this decision. Not having the attitude of "money is in my pocket therefore I must spend it" is a huge lesson for a young person.

Within a couple years he will know more about stocks than most high schoolers if he keeps an interest. If not, I won't force it on him. What is great is that it is his idea...

He wanted to use Zecco because he is smart enough to know that no commission is better than a commission. But when that option was not available, he wanted it to be real...not just making the money in a play game and having me GIVE him money. He wants to OWN a stock...and I am not going to lie to him. He is going to write a check from his account at Bank of America...that money has to go somewhere. He will be aware it is no longer in his account, etc. Its like poker. PLaying for chips just is not the same as playing for chips that are convertible to money.

[Scorpion Man]

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Does your son know anything about compounding interest? I think 9 years old might a little too young for an education on stocks. Why not deposit some money in an online savings account earning 5% interest and explain to him how interest works. Sit him down when you deposit some money into the account each month and then show him the interest he has earned. He will love watching 'his' money grow each month. Id save the stock education for a few years down the road.

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He sure does. He talks to me about it all the time. I don't know if you have kids, but this is a great lesson for them...its difficult to get a kid to comprehend 5% interest (it was actually 1-2% when my son opened his account). If he has $100, wait a year and get $2?? That does not buy a single pack of YuGiOh cards. Its a joke. So I made a deal with both my kids...first year, any money they have left in the bank, I topped up 50%. Second year once they got some critical mass, 30%. Next year will proably be 20-25% I have not decided. I will continue to give him that on any money saves...stock market or not. He gets it. He will get stocks too, trust me.

I wouldn't push it on him unless he were interested. He has asked me every day this week when we were going to choose his stock. He has told every one of his friends. He learned this week that Nintendo was actually a Japanese company, as is Sony. He was very surprised by this. He could tell you that it is harder to get easy to decipher financial information for him from a foreign stock, so he may choose to go domestic.

No all kids can handle this. I don't know if you have kids, but if you do, you know that different kids have different aptitudes and can handle things at different times. He is ready to start.

Lastly...teaching saving and compounding is nice, but very simple, and no risk. He is going to learn about winning, losing and risk. THis will help him avoid bigger mistakes when he gets older..the kind of mistakes others make as they are buying their first stocks when they are 30 years old. I owned a company called Maxicare when I was about 14 years old. Chose it myself with my own money. Read about it in Business Week. Watched it go bankrupt. I must have had about $500 in it or something. Best $500 I ever spent. Much more valuable, actually than a success...beating the market at the beginning is probably the worst thing that can happen to you.

[maxtower]

I assume play money wouldn't include transaction fees.

If his dad makes him read a good book about investing, he may find that he just wants to plunk all his money down on an index fund.

[RedJoker]

To all those advising index funds, this is about getting an education and learning to value individual stocks. Profits or losses are irrelevant at this point.

Personally I don't think nine is too young. I have a friend who is a professional investor and has set up educational seminars, etc. around Ireland. His six year old son has his own account and is apparently doing quite well. I've met his son and he is very bright.

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I owned a company called Maxicare when I was about 14 years old. Chose it myself with my own money. Read about it in Business Week. Watched it go bankrupt.

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So you have had a losing year [img]/images/graemlins/wink.gif[/img]

[midas]

Scorpion:

1. My Dad tried the same thing with me when I was 10 - I got very bored after a few months.

2. Unless he knows the fundamentals of a company and the valuation metrics - it's really just luck and hopefully some fun if the stocks go up.

3. Why don't you practice SAT questions? Then he could ace the test, go to Wharton and run your hedge fund for you!!

[Dazarath]

Scorpion Man, contrary to what some other people here think, I think it's a great idea. I wish my parents had got me interested in stocks at an earlier age, as I have only recently been trying to learn about the market. I also found out about Roth IRAs on my own, and I found myself wishing that my parents would have told me earlier so I could've put some of the money I earned in high school towards one. Of course, one could argue that if my parents had told me about stocks when I was young, I wouldn't be interested in it now. I guess I would just suggest to make sure that your child is interested in it on his own accord, rather than trying to force him to learn about them, which might make it seem like a chore.

[arsoisaen]

My parents did this for me too. However, one difference is that my trades were executed somewhat of a piggyback on theirs.

I had 500 i think to start, did my research on a couple big companies my parents were interested in, and when they made a trade they asked me if I wanted to join in to. So essentially I had a small percentage in my parents account, which shifted around according to if i followed their trades or decided to sit tight.

[Scorpion Man]

I know you have all been waiting with bated breath for this...we opened up an account at Scottrade this morning. Kinda nice that they have a branch right here in town. Zecco emailed me that they will be allowing custodial accounts eventually, hopefully this year.

Nintendo is stock number 1. Not clear yet about stock number 2...given current infatuation with his new 8gb nano, Apple is a strong contender.

He told me this might be his second stock over lunch...I said that it was his call but it might be risky and I asked if he knew why...he answered "because even though they have great products, people have very high expectations already and they might be disappointed."

Yes, grasshoppa.

[hedgeyerbets]

he already puts much of this forum to shame [img]/images/graemlins/wink.gif[/img]