The Next $1,000

AS I MENTIONED in an article back in June, my wife and I funded a custodial account for our son three years ago. He used the $1,000 we gave him to buy shares of Nike and Exxon.

We figured what’s good for our oldest child would also be good for No. 2. Our daughter recently completed fifth grade and is now age 11. Earlier this summer, we set up an account for her and added $1,000. While she hasn’t shown as much interest in investing as our son, there were three solid learnings from opening her account and making her initial investments:

1. She took the responsibility of picking stocks very seriously when she understood that “real money” was in her account and not just points that had accumulated in an app. After some basic financial analysis coupled with consideration of her personal interests, she selected Nintendo and Gap as her two stocks to purchase.
2. As with my son, she had to decide whether she’d reinvest dividends. While my son picked up on the power of compounding as part of the reinvestment decision, my daughter was more focused on the “real money” that companies would pay in dividends. I explained that if companies are profitable, they can elect to pay a portion of profits to shareholders. She liked the notion that she’d likely get cash each quarter from both companies.
3. Finally, upon purchase of Nintendo’s stock, we discussed that “ADR” was appended to the end of the company’s ticker symbol. I was able to share that while Nintendo is a Japanese company, we can buy an ADR—or American depositary receipt—for Nintendo that’s traded on a U.S. stock exchange. While this concept was over her head, it at least introduced the notion, and no doubt we’ll talk about it again.

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