Investing class for teenager

I am not an investing expert. Just use that as the backdrop.

Short version:
Suggestions and comments for creating a tailored investing class for my teenager.

Full version:
My daughter turns 13 this week. I’ve been thinking about how to get her excited about investing for her future. Recently, she was very stoked to see the power of compounding interest. So I’ve been thinking of how I can make investing a part of her life, vs. just something “dad does”. Then I realized, hey, we home school. So I can make whatever kind of class I want to add investing into the weekly schedule (currently, I’m the math guy at home).

Ideas I have so far include:

  • review/dig into the crux of “Saul’s approach”
  • do a mock portfolio where she picks some and I pick some
  • do a real portfolio with a small amount of money

What I’m not clear on just yet is where to go (other than doing a general web search) for a number of basics about investing. Most of what I’ve learned I’ve learned from various MF boards. But it would be nice to have some “material” to use, vs. just my memory of what I’ve learned.

Thanks for any ideas!
-FrickNFool

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it would be nice to have some “material” to use, vs. just my memory of what I’ve learned.

TMF actually publishes some basic intro books, including one specifically for teens (which I have not read):

http://www.amazon.com/Motley-Fool-Investment-Guide-Teens/dp/…

Just go to Amazon and search for “motley fool” and you’ll see a few different books.

Personally, if there were just 3 key points I could get to stick with my child, they’d be the following:

(1) Put your money to work for you; don’t let it rot in a bank account. The power of compounding is obviously the major component of this, so it sounds like you’re making good progress on it.

(2) Regardless of how bleak things look, the market always comes back. We’ve been through world wars, depressions, financial crises, numerous recessions, disease pandemics, civil wars, terrorist attacks, and just about everything else – and the market has always recovered and gone on to new heights.

(3) Live below your means. Growing up, I always despised the idea of working as a slave all my life trying to scrimp and save up so that I could “enjoy” a last decade of life (assuming I lived that long!). I wanted to enjoy the rest of my life too. Nobody ever pointed out to me that living below my means could mean retirement in my 30’s – I had to figure that out on my own. I think I would have viewed things much differently as a teenager entering adulthood if I’d realized that.

To me, those are the key things that I believe would setup my child for financial success as an adult. The rest are details that can be learned if they have an interest – otherwise they can just regularly add to an index fund and still do fine over the long run.

Neil

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Children learn by playing. Some kind of investing game like Monopoly, but with real money, however little, might be the ticket.

I can see a scenario where your daughter has to invest in companies she does business with. Clothes, toys, food, stores, restaurants, etc. You open an account for her and deposit a monthly or quarterly allowance which she has to manage with your advice.

KISS: Keep It Simple Sally!

Denny Schlesinger

Some kind of investing game like Monopoly, but with real money, however little, might be the ticket.

The beauty of Monopoly isn’t what happens on the board, but what happens off of it between individual players. “If you sell me Reading Railroad you can ride all you want FOR FREE!”

“What about you get the monopoly and we enter a revenue sharing agreement?”

Monopoly should always be played with a legal pad and a pen close by.

Jeb

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If you’re able to teach her how to separate hype from fact you will have accomplished a great deal. Be sure to read some of the posts at Seeking Alpha, especially the ones that argue for short positions, try anything by Michael Blair about Apple. The guy’s been pumping a short position for years - or so it seems anyway. Apple refuses to cooperate.

But even the posts like “Apple should buy Twitter” (or whatever). As if Tim Cook gets his advice by reading SA articles.

Be sure to devote a chapter to Charles Ponzi, Bernie Madoff, pyramids and stuffed inventory channels.

I would also be sure to spend some time on how to make a bubble - going back to the Dutch tulip craze in the 1600s so she realizes these things aren’t new and they keep getting repeated because people don’t just ignore the lessons of history, they never learn them in the first place.

Of course, this extends beyond investing. Watch a few infomercials together and try and spot the hyperbole and outright lies. Folks, this isn’t like your self-sharpening razors, it’s even better!!!

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If you do a real portfolio with real money, your teenager will pay more attention and take it more seriously, I’d think.

Saul

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Adding a bit to what I noted earlier - I was not being cynical, but I think it’s very important that if you are going to teach someone about money it’s very important to teach them that forever you will be confronted with people who will put a lot of energy into devising schemes to move your money into their pile. It’s vitally important that she learns how to recognize it.

On a separate point, Saul thought a real money portfolio is likely to hold her attention better than than just lessons on financial analysis. I would carry it one step further and suggest that you help her with a real money portfolio tied to a goal of providing a contribution to her college costs.

On a separate point, Saul thought a real money portfolio is likely to hold her attention better than than just lessons on financial analysis. I would carry it one step further and suggest that you help her with a real money portfolio tied to a goal of providing a contribution to her college costs.

I’m not sure, but I was thinking that being able to take out, say, 10% of her profits each year (without having to worry about taxes for now), to spend on clothes, an iPhone, or whatever she wants, would definitely add to her interest. What do you guys and gals think?

Saul

2 Likes

I’m not sure, but I was thinking that being able to take out, say, 10% of her profits each year (without having to worry about taxes for now), to spend on clothes, an iPhone, or whatever she wants, would definitely add to her interest. What do you guys and gals think?

Saul

If you can’t dispose of it it isn’t yours – so yes! You could agree that she can take out part of the profit, for example. It’s important to get the incentives right. You can only play with earned money, not with contributed money.

Denny Schlesinger

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I guess access to the money, how much and when depends a lot on just how much real money is in the real money investments. I think being able to draw for whatever would be something that would help maintain interest. I also think that having it tied to a longer term goal - like college tuition would be a good lesson in saving for the future, deferred gratification and patience.

What ever is decided, make sure that any money drawn is part of an exercise in calculating compound interest and that the long term loss of early deductions is a conscious decision.

After all, this is supposed to be structured as a learning experience.

re: Teenager investing
re: Ideas!

FrickNFool,

Let’s peruse the following that was asked about Teenager investing.

http://discussion.fool.com/re-teen-investor-jxker-what-ever-you-…

Then have her create a Perpetual Income coming in folder for the rest of life. When she retires, SSI might not be around and then what. Have her start now as one of her projects.

http://discussion.fool.com/whafa-create-your-own-perpetual-incom… add as a ref: https://dividata.com/

Hope this can be some assistance and have her take her tyme. There will be lots of material to read and absorb.

Quillnpenn - a poor church mouse scratching for a living as a professional Swing Trader.
“In tribute to all who seek to record their ideas and share them with others”

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Thanks everyone!!

Some ideas I already had, but there were definitely some new thoughts that came out.

With any luck, I’ll post how things are going over time, for any other parents of teens…

-Frick (whose wife reminded me that I cannot retire in my thirties)

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