Teach your kids to invest in the stock market, but prevent them from squandering it!

My son was only angry with me for a little while!

When I first learned to invest for myself, I created an account for my then-12-year-old son at the same time. He had saved $1000 from birthdays and odd jobs. Without hesitation, he asked me to buy “Apple, Google, Johnson and Johnson.” (He’s almost 23 years old now and his instincts are still good.)

I set up the account in my name and offered to pay the taxes on any gains-- a generous gift that he did not appreciate at the time.

Then, my bright, thoughtful son went through a period of poor decision-making, as many teens and young adults are apt to do. There were times he wanted to get his hands on those funds for purposes I did not support, but with the account in my name, he couldn’t. I may have once, in a heated moment, told him he could have the stock “when I’m dead.”

And during some of those difficult times, the account made my gift-giving easier. His Christmas stocking one year contained a pair of Nike basketball shorts and a certificate showing I’d spent $250 on 10 shares of Nike stock for him-- another generous gift that he did not appreciate at the time! Those shares are still in the account, and were worth $1550, the last time I looked.

I was proud that when he got a small, unexpected windfall in college, he came to me and asked for advice. He set up a Roth retirement account and I showed him how to use options to generate income on some nice, boring, predictable stocks. Now that he’s paying a lot of his own expenses, he finally sees the value of that forced savings and investment plan.

He’s studying physics, math and computer engineering, and seems headed for a solid financial future of his own. And there is enough in the account to help him pay off student loans, move to his own place or buy the car he needs. So I now expect he’ll get control of the account closer to his college graduation date than to my funeral!

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