Buying Stock With Your Kids: Start Young!
In my opinion, the American dream is to set your children up to be more well off than we are as parents. These days, this may seem like an impossible task being the job market has been stalled in recession even though the stock market has long ago begun its rebound from its 2009 lows. Nonetheless, it is important for we as parents to start planting the savings seeds that will someday grow tall like a Sequoia in the Pacific Northwest. Equally as important may be getting your children interested in doing the same from an early age. But how does one get his or her child to take an interest in saving money over time and watching it grow as an investment when they would rather spend all of it on toys? One great way is to find investments that have a good chance to win over the long term as well as have name/brand recognition for your child!
Finding Investments to Interest your Child
When I began investing for my son Isaac several months before he was born, I tried to think of companies that by an early age, he would take interest in following as an investment even though he wouldn’t necessarily know what a stock was yet. I began thinking about things that children like. Let’s see, kids like toys, cartoons, train and dolls to name a few. I also thought about what kind of products with brand recognition we as parents tend to use a lot of while caring for our children. Things that came to mind were shampoo, diapers, baby food, and various children’s safety products like car seats, child locks, and things of that nature. Some ideas for stock picks are already beginning to come into focus. Companies like Johnson and Johnson, Disney, Hasbro, Chicco, Graco, Pampers, Huggies and ToysRus fit the bill and could warrant some further investigation. First thing to check when considering a potential investment in this way is to see whether or not the product is part of a larger conglomerate company, a private entity, or a publicly traded organization.
Dig A Little Deeper
Using my examples above you will find that Johnson and Johnson is both a conglomerate and publicly held company as is Hasbro and Disney. Pampers and Huggies are part of a larger conglomerates Proctor and Gamble and Kimberly-Clark respectively as is Graco (Rubbermaid), and Chicco (Artsana). Finally, ToysRus is a privately held company. What this means is, from the examples I have listed, Hasbro, Disney, and Johnson and Johnson can each be invested in as individual stocks, Pampers, Huggies, and Graco can be invested in through their listed parent companies, and Chicco and ToysRus are privately held and cannot directly be held as equity. Now that I have narrowed down my options I can now explore how well I think these companies as stock investments may do over a long period of time.
No Tears Here!
For the sake of brevity, I will use the stocks that I ultimately ended up investing in as examples. First, Johnson and Johnson (ticker symbol JNJ) has been around forever. This is good because I can take a look at its performance over the long haul as well as its current financial well being to judge it as a potential investment for Isaac. At first glance I notice that JNJ pays a nice dividend of 3.54%. That is good considering bank accounts interest rates are mostly well below 1% these days. Next, I take a look at JNJ’s stock performance over as long a period of time as I can. On Google Finance I am able to look at JNJ’s performance dating back to about 1977. The chart speaks for itself (click here).
This quick and dirty analysis as well as reading recent quarterly filings and news snipits convinced me that JNJ would be a good long term pick for my son. When he is old enough to understand, I can show him the investment and he will easily recognize it as the company that makes his “no tear” baby shampoo!
I'm Going to Disneyland!
The next stock I looked at (and honestly made up my mind on before researching) is Disney (ticker DIS). Disney which every kid will undoubtedly be aware of if not crazy about has also been around a long time and has a lot of data points that can be referenced. It has a smaller annual dividend of 1.63% as compared to JNJ but has an even more impressive chart dating back to around 1977 (if not a little more volatile) as can be seen here:
Now Disney seems to be a little more volatile based upon economic conditions and consumers discretionary income levels than the staple Johnson and Johnson but in the long run it is likely a good choice and your kid will love the concept that he “Owns” a little Disney magic!
Toys, Toys, and a Nice Dividend
Hasbro, the children’s toy maker also has a long history and brand recognition. Like Johnson and Johnson, it sports a dividend yield of over 3% and has an impressive chart dating back to 1977:
Linkes to other Financial Articles by this Author
Summing it Up!
All three of these companies have the potential to be great long term investment picks over the long haul for your children. Over 18 years, decent dividend yields along with slow but steady share price growth could go a long way toward making a nice nest egg to go toward college or personal use for your child when he or she will be ready to hit the ground running in early adulthood Remember that consistent savings and investment is key to achieving long term success. Hopefully, stock choices like these will help introduce your children to the world of investing in a way that will make it fun and interesting and encourage them to continue the practice long after they are making the big bucks on their own!
All Investment Opinions in this article are just that, opinions. Always do your own research before you make an investment! Good luck!