Wow The Dow!: The Complete Guide To Teaching Your Kids How To Invest In The Stock Market - Softcover

Über die Autorin bzw. den Autor

Lynn Roney began investing at the age of twenty-seven, after she taught herself the tools of the trade by reading The Wall Street Journal and attending investment seminars. Roney holds a bachelor's degree in business management from Southeastern University and is working toward her MBA at the University of the District of Columbia. She lives in Washington, D.C.

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A FAMILY THAT LEARNS TOGETHER EARNS TOGETHER!

Whether you're a novice stockholder or a seasoned investor, you can teach the next generation of stockholders how to invest successfully. Creative, practical, and full of savvy financial advice, Wow the Dow! is a family-oriented guide to the workings of Wall Street that shows parents how to start investing in the stock market with their children and encourages kids to think intelligently about money.

Cofounders of Stock MarKids, "TM" the nationally affiliated parent-child investment club, Lynn Roney and Pat Smith explain the important aspects of the stock market and provide parents with easy-to-follow advice for introducing the exciting world of finance. Complete with games, exercises, and real-life profiles of successful child investors, Wow the Dow! covers:
-- The basic concepts behind investing
-- Teaching your children how to read stock quotes and understand business news
-- Building an appropriate portfolio with stocks your kids will pick
-- Creating strategies for making investing fun and profitable
-- Where to go online for stock games, investment sites, and financial resources
-- Tips on starting a parent/child investment club

With its commitment to educating kids and encouraging them to find new and creative ways to invest, Wow the Dow! is a must-have handbook for every parent.

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Chapter One: Raising Your Child's Interest Rate

When Danielle was a toddler, she loved to go to McDonald's to eat because French fries were her favorite food. Lynn liked McDonald's, too. Eating there together was a weekly outing. She was also a longtime shareholder.

One Friday afternoon Lynn told Danielle, "I'm glad you like McDonald's so much because I'm a part owner of this restaurant."

"You are, Nana?" Danielle's eyes widened. "I want to become a part owner, too!"

So, in October 1988, Lynn purchased her granddaughter's first share of McDonald's stock.

"I purchased the stock just as a fun thing for her," Lynn says. "She owned only 1.1984 shares, and all we had to show for it was a statement with the McDonald's logo. But it didn't matter. Danielle was so happy and proud. When we took one of her friends along to eat with us, she would say, 'Nana, tell Kandyce that I am a part owner of McDonald's!'"

Ownership bestows more than pride. It gives people a reason to care, a reason to take on responsibility. Watch how a child behaves toward a beloved stuffed animal or a bike of her very own.

Lynn realized she didn't need to explain abstract concepts such as share price, dividends, interest, or even what a stock is. All she needed to do was tap into Danielle's powerful desire to own. If she owned even a piece of a company whose product made her happy, then she'd be more likely to take an interest in what happened to her piece -- her share.

Sure enough, long before she ever understood what a share meant or what it was actually worth, Danielle delighted in having a stake to protect. She wanted to keep track of it. She had watched her grandmother read the newspaper, so before she could even pronounce business section, Danielle was asking to see it at the breakfast table. "I need the business sezhion to check my stock," she'd say. Lynn showed her where to look in the newspaper -- what section, which exchange, which abbreviation -- and pointed out the number to focus on. "I told her that what she wanted to check was the price of her stock share," Lynn recalls. "She didn't understand what a stock price was, but she understood that the higher the number, the happier she should be, so she'd shout, 'Nana, it's 39! Yesterday it was only 37, and today it's 39!'"

As Danielle's interest grew and her loyalty to McDonald's remained, Lynn added additional sums to her account by selling Danielle's U.S. savings bonds. "I wanted to reinforce her learning," Lynn explains, "and I knew that by the time she became an adult, this investment would grow and compound nicely for her, whereas the savings bonds might not even keep pace with inflation."

Not only were savings bonds not saving Danielle money, but they weren't teaching her anything. They didn't involve her. They were too abstract and forgettable. In contrast, investing money -- giving Danielle ownership of a company whose franchises she could see everywhere and whose product she could experience firsthand and enjoy -- was engaging her curiosity. From that initial spark of interest, Lynn knew her young granddaughter would pick up practical skills, and by the time the investment was really worth something, she'd be able to manage it competently.

Eight months after Lynn purchased the additional shares in Danielle's name, McDonald's announced a stock split. What had been 3.053 shares (including dividends reinvested twice before the split) became 6.106 shares -- twice as many. Wow! But even more thrilling was Danielle's response.

"Danielle's excitement grew just from knowing she had twice as much McDonald's stock," says Lynn. "She may not have understood that the dollar value of her holdings remained the same, but in time I knew she'd grasp it. And we had so much time -- Danielle was only four!"

Is toddlerhood the perfect time to introduce your child to the world of investing? It was for Danielle, who was three when Lynn used the visit to McDonald's to broaden her granddaughter's financial education.

Piggy Banks and Lemonade Stands

We started our girls' financial education the way most parents do: We urged them to put their allowance in a piggy bank instead of their pocket. We even encouraged them to pick up pennies off the sidewalk. We helped them open a passbook savings account. We felt that teaching them to save their money was teaching them to manage it responsibly. Saving was such a simple, straightforward concept, after all. It's what our own parents did all their lives, and it's what they taught us to do as children.

Pat remembers how her dad used to give her his loose change at the end of the day. In a few weeks she had enough to roll into paper sleeves. "I always loved doing this," says Pat, "so I taught Shannon how to count money and put it into the stacks before putting it into roller sleeves. We did this at the kitchen table or on a blanket in front of the television." Pat would take the rolls to the bank, with Shannon in tow, and give her the cash. With this incentive, Shannon was rolling money on her own in no time. She spent some and saved some. Even now, years later, coin rolling is Shannon's favorite source of "free" money!

Lynn also used an idea from her youth: She got Danielle to open up a lemonade stand. Every summer until she was about nine, Danielle accompanied Lynn to the bank to take out money from her account to buy supplies and set up shop. After two weeks of working the stand, she had more than enough to pay herself and her assistant, and replenish her savings account. "Pay yourself first, I always told her," says Lynn. "Then put aside something for later."

Both of us wanted our kids to have some sense of money beyond what they saw come out of an ATM machine. We wanted Shannon and Danielle to know the value of a dollar and to get in the habit of putting money aside.

Our approach was very hands-on from the beginning because we knew our kids would understand only what they could touch, see, or play with. Pat let Shannon play with the savings bonds she had purchased for her since birth. They were stashed in a kitchen drawer -- "not the safest place," Pat admits -- and every once in a while Pat would get them out and have Shannon sort them into piles according to face value or maturity date. Shannon started playing this game before she could even count or read but quickly mastered it because it taught her a little of both. "It got so she started telling me how she wanted them sorted," notes Pat, "and I had to follow her directions to the letter."

Our kids learned best whenever they weren't made aware they were being taught. If they were having fun, if they were in our company, and if we didn't lecture or push, they proved themselves good learners. Lynn got Danielle reading at the age of three. Shannon could count and identify coin values before she was in school.

It wasn't long before we realized that our girls were ready to learn a whole lot more about money management than how to put money into a piggy bank or savings account. Saving was simple but not active or engaging enough to keep their attention, whereas investing wasn't all that complicated when you got right down to it. What child doesn't leap at an opportunity to own something? Presented that way, investing was something our girls could get excited about. And if they were excited, they'd ultimately learn everything they needed to know to invest competently, responsibly, and profitably. Teaching them wouldn't be a chore; it would be an adventure.

Let the Games Begin

If you're thinking, "I'll wait until my child shows an interest," before you embark on this trip, you could miss the boat entirely. Many forty-year-olds we know have no interest because no one ever introduced it in a creative way. Investing has never been considered...