The investment club Williams participated in as a youngster taught its members how stock ownership works, how to grow and diversify a portfolio, and how to review annual reports. “After a few years, it became second nature,†he says. “It was never anything too complicated.â€
Investment clubs, money camps–any way you can make investing fun and engaging is a good idea, say experts. Also, check out apps and games such as the P2K Money app (www.p2kmoney.com), which teaches money management.
Opening Accounts for Minors
Although in most states children younger than 18 cannot legally buy stock or mutual funds, adults can create accounts and invest on behalf of minors. Two popular options include UGMA, the Uniform Gift to Minors Act, and UTMA, the Uniform Transfer to Minors Account. According to financial advisers Waddell & Reed (www.waddell.com), these accounts are good for families who want to help their children own securities, but prefer not to hire a lawyer to create a special trust. “The account is held at a financial institution and an adult serves as a custodian,†says Elizabeth M. Ruch, certified financial planner at Waddell & Reed. The custodian can make withdrawals for the benefit of the child, but the child cannot withdraw funds until he or she reaches the age of maturity–18 or 21, depending on the state.
Ruch says there’s no limit to the amount of money these accounts can hold, but there is an annual cap on individual contributions (for 2012 the cap is $13,000). Funds gifted to these accounts are irrevocable. To learn about the specific tax benefits, consult your tax professional.
Fourteen-year-old Atlanta business partners Jordan Williams (no relation to Damon Williams) and Brandon Iverson, both contribute $25 a month in the Monetta Young Investor Fund (www.young investorfund.com). Jordan was always interested in investing and took it upon himself to learn more. “I started doing some research online and eventually found the Monetta Young InvestorFund (MYIFX),†a no-load mutual fund for kids with a three-year annualized return of 34.4%. “I went over it with my parents, and we decided to go ahead and start a custodial account.†He convinced his friend Brandon to join him. They each have about $500 invested in the mutual fund. Through their business, Making Money for Teens (www.makingmoneyforteens.org), Jordan and Brandon offer a series of DVDs aimed at helping other youth understand the power of saving and investing.