Stocks 'R' us: teaching your kids about the stock market gives them a jump-start on investing - Cover Story

Black Enterprise, May, 1993 by Timothy Middleton

You don't even have to play one of these organized games to learn about investing. Charlene Ross, the oldest daughter of radio host Charles Ross, is 11 now, and on the verge of taking the step from saving to investing. "Charlene is very conservative," says Ross, who introduced her to saving first.

This spring, however, Charlene will start venturing into the stock market with her dad's help. "She likes to buy toys, so that's what she's going to look into," says Ross, who is getting his daughter ready to prepare a research report.

Other parents who aren't financial whizzes can get their kids started easily, too--through one of the stock games mentioned above or other step-by-step guides and games. (See sidebar, "For More Information.")

Enterprising kids usually open what are called trustee accounts under the Uniform Gift to Minors Act, even if the funds they employ were earned, rather than a gift. That gives them legal entitlement to the funds, although, as a practical matter, parents typically control such funds until the child reaches legal maturity at age 18.

Unfortunately for young investors, notes Raymond Russolillo, senior tax manager for Coopers & Lybrand in New York City, the so-called "kiddie tax," targeted at children of the wealthy, also snares everybody else. Children can have earned income of as much as $3,600 without paying any income tax (although they must file a tax return if they earn more than (600). But for kids who make dollars from investments, the tax bite kicks in at $1,200.

Still, "stocks are an excellent investment for kids, especially for those under 14," says Russolillo. "They invest in growth assets, so income is deferred, which works out well not only from a tax point of view but also from an investment point of view."

Speaking of investments, Bond has a thing or two on his mind lately. This year the first alumni of his program will graduate from high school. And what is the money manager most looking forward to? "One of them is going to knock on my door, or call me from Howard University," he says. "He or she will say, 'I remember when you brought me down to Wall Street, and I've never forgotten that. Now I'm graduating and I'm looking for a career opportunity. And by the way, I think I can pick stocks better than you do.' You can bet that I'll hire that person in a minute."

FOR MORE INFORMATION

AT&T COLLEGIATE INVESTMENT CHALLENGE

Now that you realize your kids can help pay for their own college and graduate education, its time to find out how to engage their interests and inspire them. One way is to enroll your son or daughter in the sixth annual AT&T Collegiate Investment Challenge. Each fall, this nationwide educational stock-trading competition gets students into the excitement of the market--without risking real money. Last November, more than 20,000 students participated. The Challenge is open to high school and college students. Each person starts off with a fictional $500,000 account. The goal is to turn the stake into the highest portfolio value before the contest closes the following February. The top high school and college stockpickers receive $1,000 and $8,000, respectively, plus other prizes. For additional information, call 800-545-8808.