A Mutual Admiration Society

Kiplinger's Personal Finance Magazine, August, 1999 by Janet Bodnar

Invesco doesn't send educational materials to young shareholders directly. But in connection with DIFF, it presents seminars on investing to groups of children in the Denver area, where the company is headquartered (for information, call 800-255-6927).

* Monetta. The seven Monetta funds have minimum initial investments of $250 for all accounts, not just those for kids. But participants in the youth-investing program, called Monetta Express, still get some special perks. If you open a custodial account and sign up for at least $25 per quarter to be invested automatically, you receive Steady Eddy, a plush bean-filled engine and the first of eight train cars in the Monetta Express (the other seven represent each of the company's funds). When children accumulate an additional $500 in contributions they get the next car in the train, and so on until they collect all seven. You have five years from the date of enrollment to earn the entire train; or a single contribution of $5,000, divided any way you like among Monetta's funds, will do it.

The program, which also includes stickers and other rewards, is intended to "teach kids at a young age to set a goal and save for it," says a Monetta spokesperson. But the company also hopes it will bulk up low-level custodial accounts.

Among Monetta's funds, the most comparable to others in the kids' niche is Large-Cap Equity, with one-and three-year annualized returns of 17.2% and 19.6%. Monetta's is the only youth program that offers a money-market fund, Government Money Market, with a recent 30-day yield of 4.6% (for information, call 800-666-3882).

* Royce Giftshares. Strictly speaking, Giftshares (800-221-4268) doesn't fit this category: Its minimum initial investment ($2,500) is too high for most children, and it doesn't publish educational materials or focus on stocks of interest to kids. In fact, its small-company emphasis has been out of vogue recently. Still, its one-year total return of 17% to June 14 beats the heck out of a similar fund, American Century Giftrust, which lost 6.2% in the same period. And Royce Giftshares outshone the 7.1% average for aggressive-growth funds.

Giftshares is an option for parents and grandparents who want to attach strings to a financial gift. Your contribution is set up as a trust that lasts as long as you stipulate (a minimum of ten years or until the beneficiary reaches the age of majority, whichever is longer). If you're concerned about teenagers squandering college money, for example, you can arrange for the trust to pay their tuition directly, or limit kids' access to all or part of the assets until they're past college age.

Be aware, however, that donors' options are restricted as well. Once you've put money into the fund, you can't get it out.

Janet Bodnar, senior editor of this magazine, is the author of Dr. Tightwad's Money-Smart Kids (Kiplinger, $15; 800-280-7165). Send questions and comments to her at 1729 H St., N.W., Washington, DC 20006; or e-mail her at kids@kiplinger.com.