4 Tips to Start Investing for your Kids, with Prince Dykes
12 / 18 / 18
“Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.”
– Warren Buffett
Every parent wants their child to have a better life then they had. The question is how are we doing this? Through assets or liabilities? So often we give our children the world through games, cars, clothes, toys, etc. – things that are guaranteed to lose value overtime. I often wonder, what if my parents had purchased my brothers and I land, stocks in Apple, Nike, Microsoft and AT&T when we were kids, rather than buy us extra games, unnecessary clothing and other things we really didn’t need. How different would my life be? I’ve since decided to start investing for my son (Wesley) and here are four tips to start investing for your kids.
- Start Early
It’s said that time and compound interest are the two true keys to success in investing. The earlier you start the better because some things just take time. The best way to have time on our side is to start investing for your kids while they are young. It doesn’t matter what profession they chose in life, they will need finances. Put time on your side by starting today.
2. Where do I start
It’s the age-old question that everyone asks when the light bulb goes off about investing, “Where do I Start?” It’s a tough question because everyone’s situation is different. For starters I would say open a custodian checking/savings and brokerage account for your children. If you’re looking into investing to take advantage of compound interest, look into the SP 500 Index fund with the dividends being reinvested via the DRIP (Dividend ReInvestment Program). Investing in the SP 500 is investing in America and includes companies such as Amazon, Google, Apple.
3. Be Consistent
It’s great that you have started and now you have to be consistent. Invest on a consistent basis just like you pay a bill. By doing this you unlock the power of “Dollar Cost Averaging.” Dollar-cost averaging (DCA) is an investment technique which involves buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. As a result of the approach, the investor ends up purchasing more shares when prices are low and fewer shares when prices are high.
What’s the plan? How much money do you want and by when? Put a dollar value on your goals. Investing for kids’ college or retirement? How much will your kids’ college cost and how much will you need to retire? By placing a dollar amount on your goals you will know how much you need to invest and the rate of return you need in order to reach your goals. Knowing your needed amount and rate helps when picking investment vehicles.
Byl Prince Dykes, MBA, AFC
Global Children Financial Literacy Foundation