Once your child has learned how to save money to achieve his or her goals, it’s time to talk about how to earn money through interest accumulation. Learning about the benefits of compound interest should encourage children to invest their money in income-producing securities.
A good first step to moving from the piggy bank to the stock market is a simple savings account. As your child’s savings grow with money from paper routes, babysitting, or other first jobs, you may want to introduce other investment vehicles, such as mutual funds.
Consider opening a custodial account for your child under the Uniform Gift to Minors Act (UGMA) or the Uniform Transfer to Minors Act (UTMA), or start a matching program, similar to a 401(k) plan where you match every dollar your child invests.
Don’t forget that it’s important to educate children that there is market risk involved when investing in mutual funds, including possible loss of principal.
No comments:
Post a Comment