Tomorrow's investors can learn now


TODAY'S PARENTS recognize the need to teach children fundamentals of savings accounts, stocks, mutual funds and so on," says Financial Planning Perspectives. "It's now as critical as teaching children work and social skills."

The Institute of Financial Planners says, "Today's parents know their children must rely more and more on their own investing skills to fund retirement years instead of leaning on Social Security and employee pensions."

To teach investments, start with piggy banks and savings accounts. Instill the habit of setting money aside for future needs. Encourage children to put away 10 percent of their allowance, and money from summer jobs and baby-sitting. Take children to your bank and show them how they earn interest on savings.

Next, show children how stocks and bonds work. By the time they are 8 or 9, start talking with them about investing in high-quality companies. Then have them select stocks they know about -- Hershey Foods Corp., Disney Holding Co., Toys 'R' Us Inc., McDonald's Corp, Coca-Cola Co. and so on. Study companies' annual reports together.

To see how Wall Street works, take the children to your broker's office. When in New York, see the New York Stock Exchange from the visitors' gallery.

Encourage financial education through books, magazines and Web sites.

Speaking of books, "The Small Investor: A Beginner's Guide to Stocks, Bonds and Mutual Funds" by Jim Gard is an easy-to-read, illustrated text with valuable charts and graphs for beginners.

When your children start to earn "real money" from summer jobs or other part-time work, persuade them to open an Individual Retirement Account. This gets them in the habit of saving early for later years. Since children's earnings won't be high enough to present a tax problem, the new Roth IRA is a better choice than a tax-deductible IRA.

Financial Planning Perspectives says, "Investment clubs are mushrooming. Consider forming a club of young investors, with some adult experience, of course."

Teach children to read newspaper financial pages to locate their stocks and study such things as dividends, 12-month highs and lows and price-to-earnings ratios.

By the time they've grown and left the nest, they should have a solid handle on financial matters that they can carry with them for life.

Pub Date: 5/08/98

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