Want to Get Your Kids Started Investing? Here’s How
Childhood is a time of discovery. It is also the perfect time to develop healthy habits that will last a lifetime. In addition to healthy eating, exercise, and time management, financial habits should be developed in the early years.
One of the best ways for children to learn financial literacy is through experience. Actually handling money, saving, and dealing with investments is more productive than giving lectures on who to use money wisely.
Additionally, the rising cost of college tuition and the increasing financial uncertainty in today’s climate are good reasons to get the young person in your life off to a stable financial start. Saving early and benefiting from compound interest will help a young person to begin adulthood on a solid financial footing.
Why Should Your Child Invest Early?
There are plenty of reasons children should start investing early. From providing practical financial education to building a nest egg to learning to contribute to meaningful causes, it is worthwhile to get a head start on investing.
Downside 1Financial Education
Some say that financial education should be taught in schools. That may become a reality, but until it does, the adults in a child’s life are the main teachers on all financial topics from how to balance a checkbook to how to save and invest. That is why it is important to teach a child early how to invest, because they will learn by doing.
Downside 2A Secure Start in Life
There are many discussions about student debt and financial uncertainty. An antidote to these concerns is to create a secure nest egg for a young person by investing early. Compounding interest increases the benefit of early investing and can get your child off to a glowing start.
Downside 3To Promote Good Financial Habits
Too many young adults being dealing with their finances when they leave home. Suddenly to become responsible for rent, bills and expenses can come as a shock. Children who invest early are well-prepared for these commitments because they have been preparing for financial independence from an early age.
Downside 4To Teach Them to Invest According to Their Values
Teaching children to give charity fosters empathy. Investment takes this concept a step further and creates a mutually beneficial situation for both the investor and the company or organization. A child who invests will learn that they can use the money to promote growth and receive an appreciation on their investment.
For instance, The Jerusalem Portfolio offers fractional interest in 100 Israeli companies and allows investors to express their love of Israel and at the same time invest in a high-growth economy. It is an ideal opportunity for a young person to play a tangible role in Israel’s future and connect with their Jewish identity.
Types of Accounts
A custodial account or trust accounts can be opened on behalf of a child under 18. Once the child reaches the age of majority, the account becomes theirs. Until that time, an adult will manage the account for them, but the adult cannot access the funds except in certain circumstances.
Many teenagers have first jobs and want to save for special purchases. Financially savvy young people may want to start saving for an IRAs. There are many types of IRAs, usually with contribution limits of around $6,000 a year. Regular IRAs are funded with pre-tax money and are taxed when the funds are withdrawn. The funds for Roth IRAs are from money that has already been taxed and there is no tax burden when the money is withdrawn.
The Jerusalem Portfolio
The Jerusalem Portfolio is the first type of investment for many young people. It is often given as a bar or bat mitzvah, birthday, or graduation, but it can be presented at any time. TJP can be given for as little as $180 along with a customized certificate and a beautiful image of Jerusalem. From an initial gift of TJP, the investment can be added to and continue to grow.
Taking the First StepsIf you are ready to get your child started investing, keep these tips in mind.
Select the Right Brokerage
Seek a regulated broker with a solid reputation and one that you are comfortable working with. Ensure the broker has experience working with accounts opened on behalf of young investors.
Set a Goal
Goals are fun for kids and provide a challenge. Are you investing for the purpose of growing funds for college or for a vacation? The purpose can change but should be stipulated in the beginning.
Decide Which Account Is Best
Whether you are starting with a gift of The Jerusalem Portfolio or are opening a trust or custodial fund, find the type of portfolio or fund that best suits your investment goals and child’s interest.
Determine Contribution Amount
The amount you begin with may depend on the type of account you are opening, investment goals, and how early you are starting to invest. If you start earlier, you have more time and can begin with a smaller amount. If you want to vary the amount you invest over time, find the best type of account that suits these adjustments.
Get Your Child Involved
Make sure your child is an active participant in the investment process. Show them the reports and explain concepts like interest and dividends. Encourage the child to make his or her own contributions to the account.
Why The Jerusalem Portfolio Is an Ideal First Investment.
The Jerusalem Portfolio is comprised of a fractional interest in 100 Israeli companies through a portfolio of professionally managed ETFs. The recipient will be given a plaque with a beautiful and customized image of Jerusalem. Talk to our experts today about giving the Jerusalem Portfolio to a special young person as a bar or bat mitzvah gift, birthday, graduation, or other occasions.