My mailbag is always full of questions from readers wondering how to introduce their children to the stock market. That can be a tough task.
Here are some suggestions for making the lessons educational and entertaining.
Books, publications, etc.
Children's money author J.M. Seymour has produced a handy booklet that is part calendar, part journal and part stock market primer. The Stock Market Planner 2004: 12 Easy Lessons to Boost Investment Savvy includes monthly minilessons for kids that highlight investment basics.
For example, the February lesson calls for obtaining a corporation's annual report and learning about the company's products or services, its financial results and stock market performance. There is also a series of questions such as: What is the company's stock market ticker symbol and its recent stock price?
Seymour also has sprinkled her planner with quotes from famous investors, resource lists, charts to track a company's stock price and quizzes that help youngsters understand concepts such as investment risk. The planner seems most appropriate for middle school and high school students.
Another worthy title is The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of, by David and Tom Gardner and Selena Maranjian.
The Gardner brothers burst upon the investment scene during the bull market of the 1990s and have developed their Motley Fool persona into a multimedia empire. The strength of the Motley Fool guide for teens is its ability to demystify stocks and mutual funds and share the pros and cons of investment strategies in a lighthearted manner. The Fool Web site (www.fool.com/teens) is also designed to help kids learn all aspects of the stock market.
Finally, don't overlook the value of newspaper stock market tables as a teaching tool. It's probably safe to say that more kids know how to read the box scores in the sports pages than the stock market tables in the business section. Guess which skill could be more important in the long run.
It doesn't take much time to help your children learn the meaning of all the abbreviations on the stock pages _ papers even provide glossaries.
If you are looking for a way to engage your teen in a conversation about stocks from the comfort of the family room couch, try popping in a movie. You can find a few titles with Wall Street plots, including some that were big hits. None of these movies would be appropriate for younger children.
At the top of the list is Wall Street, which stars Charlie Sheen and Michael Douglas. This movie from the 1980s is all about greed, corruption and selling your soul _ appropriate topics, to be sure, in this day and age. The film's most memorable moment involves a "greed is good" speech delivered by a Wall Street wheeler dealer aptly named Gordon Gekko, played by Douglas.
A few other movies to consider: Trading Places, a Dan Aykroyd-Eddie Murphy movie that touches on commodities trading; Boiler Room, about a fast-talking stockbroker who walks on the shadier side of Wall Street (the cast includes Vin Diesel and Ben Affleck); and Other People's Money, which features Danny DeVito as corporate raider Larry the Liquidator.
Forming an investment club is a great way for teens to pool their money to buy stocks and learn the basics of investing. Start with a fantasy club to pick stocks with play money to get the hang of investing, or go for the real thing. Whatever you do, start small, with no more than a half-dozen kids, and come up with a name.
An adult will need to get the club off the ground; a stockbroker will need to set up a brokerage account and make the trades. Most investment clubs meet once a month, and each member has a designated role to research a stock.
Though not a necessity, many startup investment clubs join the National Association of Investors Corp., which provides members with research tools and low-cost trading plans. Go to the NAIC's Web site (www.better-investing.org) for detailed nuts and bolts information on how to form a club, or call toll-free 1-877-275-6242.
Remember, the idea behind many clubs is to learn about investing and to have fun. Making money is the icing on the cake!
WHAT'S A STOCK?
Do your kids understand the language of Wall Street? To find out, have them match these definitions with the term.
1. The company's profits after taxes, divided by the number of common shares.
2. The payment to a stockbroker for buying or selling securities.
3. The average price of 30 well-known stocks selected by the editors of the Wall Street Journal.
4. An organized marketplace where securities are bought and sold.
5. The share of a company's annual profits paid to stockholders.
1. Earnings per share
3. Dow Jones industrial average
4. A stock exchange
Source: Stock Market Planner 2004: 12 Easy Lessons to Boost Investment Savvy, by J.M. Seymour