More Kids Investing In Stocks

Jan. 11 -- Forget baseball cards. These days, kids are trading stock shares and comparing portfolios.

In increasing numbers, children are jumping on a roller coaster ride usually reserved for adults: the stock market. According to Stein Roe Mutual Funds, about 19 percent of students in grades 8 to 12 own stocks or bonds, nearly double the 10 percent who owned them in 1993.

About 2 million of them are active investors who pick and choose their own stocks, said Ginger Thomson, chief executive of DoughNET.com, a financial Web site for children.

Mellody Hobson, the President of a Chicago Investment firm called Ariel Capital Management told ABCNEWS’ Good Morning America that parents can help kids get involved in investing by showing them how it can pay off. Hobson says you can give your child examples of investment opportunities using items that play a role in their every day lives.

Show them for example how much money they would have in one month if they cut out buying sodas daily and invested that money instead. Hobson says parents should let kids spend some of their investment profits on something they really want. That way, children understand that investing their money can actually pay off with some serious rewards.

A rising number of mutual fund companies, financial planners and other investment organizations are starting to tailor their products and services to teens. The Stein Roe Young Investors mutual fund has more than 231,000 accounts, an exponential leap from the 4,056 it had just six years ago. The average investor age is 11. Children tend to snap up stock in companies they know, such as McDonald’s, or they buy tech stocks.

With the rapid rise of online investing, many teens are trading themselves. Parents have to set up custodial accounts for minors, but kids who know their accounts’ passwords can trade when their parents aren’t around.

If parents are willing to do it, matching your kids investments dollar for dollar will really help them in the future. To make it easy on parents who want to help their kids get ahead, the brokerage firm Charles Schwab & Co. launched its new Gift Package last summer. It allows parents, grandparents and others to open brokerage accounts for an 18-year-old with as little as $500, one-tenth the cost of opening a regular Schwab account.