Danielle Flythe of Washington, D.C., believes every investor should follow these four rules: “Start investing early; teach your kids it’s never too early since we are consumers; contribute to your investments on a regular basis; and reinvest your dividends.”
This is the philosophy that landed the 17-year-old first place in the sixth annual Stein Roe Young Investor national essay contest. The competition, which is open to students from the fifth to 12th grade, awards $34,000 in Stein Roe Young Investor Fund (SRYIX) shares to finalists. From more than 1,000 entrants, three winners are chosen in four grade categories. Flythe, who coincidentally received shares of the fund last year as a Christmas present from her parents, snared the top prize of $5,000 in the 11th to 12th grade category.
One of the reasons Stein Roe (www.steinroe.com) sponsors the essay contest is to communicate with its young shareholders, says David Brady, portfolio manager of the fund. It does so by publishing two quarterly newsletters: Dollar Digest for preteen investors and It’s Your Money for teen investors, who are allowed to submit questions to company CEOs to be answered and published in the magazine. The fund is made up of companies that sell products and services that appeal to, or affect the lives of, young people. For those who do not enter the contest but are still interested in investing, the minimum initial investment can be as low as $250 if you agree to contribute $50 each month.
Flythe has been an avid investor since the age of 3 when her grandmother opened a custodial account with $100 worth of McDonald’s (NYSE: MCD) stock in her name. Since then Flythe has added General Electric (NYSE: GE), The Limited (NYSE: LTD), EMC (NYSE: EMC), Microsoft (Nasdaq: MSFT), Yahoo (Nasdaq: YHOO), and Mattel (NYSE: MAT). As of June, her portfolio was worth a little more than $13,000, after losing about $22,000 in value since Sept. 11. But Flythe isn’t worried. “Because I am a long-term investor, I have faith that the market will come back up,” she says.
Young people like Flythe who are exposed to the concepts of saving and investing at an early age are more inclined to stick with them as adults. This is why it’s crucial for parents to adopt and adhere to principle No. 6 of our Declaration of Financial Empowerment (DOFE): to teach business and financial principles to my children.
Financial literacy can be intimidating for adults and children alike. “Learning together as a family is a wonderful bonding activity,” says Brady. Here are some ways to make money management fun and exciting for the entire family.
TALK ABOUT MONEY
Tammy Mallay, youth education director for the Atlanta chapter of the National Association of Investors Corp. (NAIC), says set aside a couple of hours regularly to go over the family’s finances with your children. Explain how time is on their side. For example, a 10-year-old who purchased 100 shares of Wal-Mart back in 1982 at $18.50 per share, with dividends reinvested, would be a 30-year-old