Portfolios for Kids Put Stock in the Future : Finance: Advisers say the investments are a good way to educate children about the business world and teach them how to be savvy consumers when they grow up.
Every small-time investor has “what if” dreams.
What if your grandparents had invested in IBM in the pre-computer era and left their stock to you, their favorite grandchild? What if your parents had bought 100 McDonald’s shares for you in 1960, or even 1970? What if you’d taken that advice to sink your savings into biotechnology stocks a few years back?
Well, what if you bought stocks for your kids’ or grandkids’ future now?
Financial advisers and many parents think it’s a great way to educate their children about the business world and teach them how to be savvy consumers when they grow up, all while watching their investments grow.
“Certain stocks have a lot of appeal for young people,” says Vita Nelson, editor of the Moneypaper, a financial newsletter based in Mamaroneck, N.Y.
“They may enjoy watching the progress of these companies, whose products they will probably be using themselves. They’ll understand why they should put aside some of their allowance money for them.”
A 13-year-old, much less a 3-year-old, may not know the difference between Johnson & Johnson and Procter & Gamble, but he or she probably is a frequent consumer of both companies’ products: Band-Aid, Tylenol, Crest, Jif, Hawaiian Punch.
Other companies are identifiable to most every American old enough to walk and talk: McDonald’s. Coca-Cola. Ford.
The National Assn. of Investment Clubs (NAIC), a nonprofit organization for investment advice, runs a popular program used by many of its 140,000 members to give stock as gifts to children or grandchildren.
“One couple got Kellogg Co. stock for their grandchildren, and the kids told them every time they came to visit they had to have Kellogg cereals,” says Tom O’Hara, chairman of NAIC, based in Royal Oak, Mich.
The Moneypaper published a list this month of 26 such stocks it says would be good candidates for a children’s portfolio. It advises investors compiling small portfolios to make only one purchase from each category of two related companies:
1. Coca-Cola, Pepsi. 2. McDonald’s, Wendy’s. 3. Colgate-Palmolive, Procter & Gamble. 4. Browning-Ferris, Waste Management. 5. Exxon, Mobil. 6. Black & Decker, Stanley Works. 7. Hershey, Wrigley. 8. Campbell, Heinz. 9. Smucker, Ralston Purina. 10. Kellogg, Quaker Oats. 11. GE, Johnson & Johnson. 12. Polaroid, Kodak. 13. Jostens, Clorox.
All are well-established companies that offer dividend reinvestment plans (DRPs), enabling investors to buy stock in small amounts without transaction fees. Investors who buy at least one share elsewhere can buy additional stock from the company and have their quarterly dividends automatically reinvested.
Numerous other companies, some of which offer DRPs, also may inspire children and long-term growth.
Michael Burke, editor of the Investors Intelligence newsletter in New Rochelle, N.Y., suggests Disney, Toys R Us, Spaghetti Warehouse, Sbarro’s, Hasbro, Mattel, Delta Airlines, American Airlines, Safeway, Winn-Dixie, Kroger--”all growing companies with visual identification for kids.”
It would be hard to find a bigger booster of stocks for children than Betty Taylor. The Kansas City schoolteacher makes a habit of buying stock in her grandchildren’s names before they are born, and with her husband runs an investment club for four generations of her family.
The children don’t have votes in the stock club but they have influence. Besides McDonald’s, the family portfolio includes TCBY, purchased after the kids discovered frozen yogurt.
“Every time we take the children to McDonald’s they say: ‘We own part of this company,’ ” Taylor says.
She has her own “what if” fantasy about having had stock bought for her when she was born, and says the best thing she ever did was to join an investment club as a young teacher 32 years ago.
Her investment advice for parents and children: Buy growth stocks. Reinvest your dividends. Invest regularly. Hold stocks for the long term.
