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Investing For Kids

When It Comes To Building Wealth,

TIME Is The Crucial Ingredient

 

Introducing the children in your life to investing is a great way to teach them about money and pass on a truly meaningful legacy. Why? Kids have a great advantage when it comes to investing—TIME.

 

Investing just $50 a month from the time a child is 8 years old until he or she reaches age 13 ($3,600 total over six years)—and never investing another cent—will end up will end up with more at age 65 ($723,325.59) than someone who starts investing at age 30 and invests $2000 every year until he or she retires 35 years later ($658,078.97).

 

Start Now

Plant the seeds... and in the future your child will reap the rewards.

1. Introduce your child to the stock market

There are many ways to save and invest. But we feel the safest and best way is to do so regularly—accumulating shares on a dollar-cost averaging basis. And the best way to do that is through the company's direct investment plan (DRIP).

2. Use direct investment plans

Direct investment plans, also known as dividend reinvestment plans (DSPPs, DRPs or DRIPs), are plans offered by companies to enable shareholders to invest cash and/or dividends directly through the company (or its agent) to buy additional shares of the company's stock. Without having to go through a broker.

3. Don't use a stockbroker

If you were to make small, regular investments in a diversified portfolio of companies through a broker, commissions might account for more of the investment than would the stock itself. Which companies should you select for a youngster's first investments?

Because you can invest through the DRIP, you don't have to contend with brokers or their commissions. Therefore, you can invest small amounts and accumulate shares slowly over a period of time—instead of making lump-sum investments.

If you or your youngster will be investing very small amounts regularly, be sure to select companies with DRIPs that accept small amounts such as $10—and be sure that there are no service fees for investing and reinvesting, not even small ones. That way, even petty cash from chores or an allowance can be invested economically.

That's another big advantage of dividend reinvestment plans for kids! After all, where else could candy and soda money be used to build a stock portfolio?

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