The Best Investment I’ve Ever Made

I think I just made the best investment I could ever make.

Kaimey and I opened UTMA accounts for our kids and let them invest in the stock market for the first time.

I had been wanting to do this for a while but hadn’t decided on the right time or strategy. Should they invest their own money or should we give them money? How much should they invest? Should it be in a UTMA account or a trust?

With our calendar being cleared for a couple months, Kaimey and I have been trying to take advantage of this time to teach the kids some new life skills. For me this has involved a lot of talk about finances and investing. I’ve tried to reinstate Stock Talk Tuesdays to give my kids some of the education I had growing up.

So for their birthday in May we opened investment accounts for them. We decided to give them each a little money to start. Maybe we’ll continue this as a “birthday present” in future years or maybe not. I haven’t thought that far ahead with it yet.

There were a couple conditions they had to follow to make their investments: 

• They had to do research and present to me a few stocks they are interested in owning. I wanted to know why they picked that stock and all of the different business lines the company owned.
• I also wanted them to invest in a S&P 500 fund. I told them to research the different Exchange Traded Funds that track the S&P 500 and tell me which one they wanted to invest in and why.

It went really well! They did great research and were really into it!

Hudson was interested in some sports apparel companies and Disney. Harper was interested in some clothing companies, some candy companies, and Disney. They both really liked Amazon as well.

We looked through the profile of each of the companies and the different businesses they operate in. We also looked at the current stock price and realized pretty quickly the kids could not even afford one share of Amazon. So that one was out!

Ultimately, they each decided on Disney. I preach a lot about diversification and Disney has done a great job of diversifying their own company. Not only do they own the theme parks that most people think of, they also own a cruise line, ESPN, National Geographic, Marvel, Lucasfil, Pixar, and many other businesses.

Next we decided on a S&P 500 fund. We mainly looked at the many different funds available and how wildly different their expense ratios can be. We  decided on the Vanguard S&P 500 ETF. And just like that, they were investors!

My clients know that I do not recommend or buy individual stocks for them. I just believe that you can diversify your portfolio so much better by buying mutual funds and ETFs. However, to keep the interest of a 12 year old and understand the basics, I thought it would be good to own a specific company they know about. Also, I like the idea of showing them over time how stocks and ETFs compare in performance, volatility, etc.

It’s not a lot of money to me, but it’s a lot of money to them. And that makes them pay attention.  I’m hopeful this will continue to drive their interest in investing and lead to more great lessons in the future.

Do you have questions about how to talk to your kids about money? Let me know! I’d love to talk to you about it. We also wrote a blog series on Teaching Your Kids About Money.

Disclaimer:  I feel like there should be a good legal disclaimer here. Although I told you about the investments my kids picked, I am not making any specific investment recommendations for you in this article. This is just an account of what happened in my family. This is not specific investment advice for you. You have to pay me for that!