Today, at age 19, Williams describes himself as a long-term investor; he likes to hold stocks for seven to 10 years. “I’m not really into quick trades or guessing or gambling. I look for stable companies that have been growing in earnings for five years consistently,†he says. Nike, Walgreens (WAG), Procter and Gamble (PG), and Apple (AAPL) are a few of the top holdings in his portfolio. “I know the companies I invest in are solid and will be around for generations. When there are overall trends of companies going down, I try, if I have the capital, to buy more [shares of those companies],†he says.
Because young investors have the advantage of compound interest and time working in their favor, it’s important to start early. If a 15-year-old invested $2,000 a year earning an annual return of 8% until age 30, he or she would have more than $896,000 at age 65, even if another cent wasn’t contributed to that investment after his or her 30th birthday. If that same 15-year-old continued to invest $2,000 a year until retirement, however, the account would be worth more than $1.2 million.
“The money conversation is one you have on the continuum,†says Hobson. For children as young as 4, parents can introduce concepts like saving and the value of a dollar. Preschoolers know what a piggy bank is for, and that a quarter is worth more than a dime. As a child gets older, around age 7, parents can discuss financial topics like investing.
Children, especially teens, are often tempted to spend whatever money they have on the latest clothes, shoes, and gadgets, so the idea of investing may be unappealing. However, parents can help spark their child’s interest by enrolling them in financial education programs for children. Summer camps such as those offered by Bull and Bear Investment Camp for Kids (www.bullandbearcamp.com), Future Investor Clubs of America (www.futureinvestorsclub.com), and YoungBiz (www.youngbiz.com) teach banking, budgeting, and investing principles.
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