Money, Power, Respect

Black Enterprise, June, 2000 by Carolyn M. Brown

INVESTING

* Earmark money for savings and investments. Your child's financial education should begin as early as age three. Even preschoolers know a quarter is worth more than a dime. Somewhere around age six, start giving your child an allowance. Open up a savings and a brokerage account and have your child set aside at least 10% of earnings from odd jobs, allowances and monetary gifts.

* Get your children to start investing early. Provide your children with a sound financial education through stocks and mutual funds. A few mutual funds provide children with not only an investment vehicle, but also a teaching tool. For example, the Stein Roe Young Investor fund (SRYIX) publishes a newsletter, Dollar Digest, which features interviews with CEOs and profiles the financial performance of companies held. Children will appreciate the kid-friendly writing. Custodial accounts for the Young Investor fund (www.steinroe.com; 800-403-KIDS) can be started with as little as $100, which requires automatic deposits of $50 a month thereafter.

Learning the basics of investing will give your children "extra credit" in the classroom, says NAIC's Jeff Fox. For instance, stock prices are reported as fractions, an important math concept for grade-schoolers. But if basic math is an anathema to most kids, how can you get them excited about stock splits, P/E ratios and betas? Answer: by having them watch how their money grows.

Two years ago, when Celestine first bought shares in Datalink Corp. (Nasdaq: DTLK), the data-storage company was trading at 53 cents. As of March, its share price was $36. Similarly, he has watched Sony's (NYSE: SNE) stock climb from $80 to a 52-week high of $314 a share (no doubt thanks to the popularity of the entertainment giant's Playstation product).

* Make money management fun. Take your children on field trips to such institutions as the New York Stock Exchange or the Federal Reserve Bank in your area. Also, play board games such as Monopoly and enter Web-based stock picking contests.

Encourage your child's school to participate in stock market games such as the one sponsored by the Securities Industry Foundation for Economic Education (www.smg2000.org; 212-608-1500). The 10-week simulation program is open to grades four through college. Student teams compete against one another during the fall and spring semesters, investing $100,000 in publicly traded stocks. The money's fake, but the lessons learned are real.

* Give investments as gifts. Encourage friends and relatives to give stock for a birthday gift, a Christmas stocking stuffer or a graduation present. Challenge your children to keep track of their investments' performance. Also, to avoid a huge tax bite, establish a custodial account for your children under the Uniform Gift to Minors Act (UGMA), available at banks and mutual fund companies. Shares are held in trust until a child comes of age. You can open an account for a minimum of $100 and as little as a $50 can be added over time. Purchases for minors must be reported on a U.S. Gift Tax Return (Form 709).