Investing in Your Kids: A Guide to Family Investment Clubs
Disclaimer: Good Day, Readers. WealthBuildingPowers blog is a financial literacy/competency blog and does not provide specific investment recommendations.
Investing in Your Kids: A Guide to Family Investment Clubs
WARREN BUFFETT SAID HE WAS: “born in the right place at the right time.”
“When (Charlie Munger and I) were born, the odds were over 30-to-1 against being born in the United States. Just winning that portion of the lottery enormous plus. We wouldn’t be worth a damn in Afghanistan. We won it partially in the era in which we were born by being born male.
When I was growing up, women could be teachers or secretaries or nurses, and that was about it. And 50 percent of the talent in the country was excluded from, in very large part, virtually all occupations.
We won it by being white. You know, no tribute to us, it just happened that way. And we won it in another way by being wired in a certain way, which we had nothing to do with, that happens to enable us to be good at valuing businesses. And you know, is that the greatest talent in the world? No. It just happens to be something that pays off like crazy in this system.
The trick, it seems to me, is to take the people that lost the lottery and makes sure that just because they, on that one moment in time got the wrong ticket, they don’t live a life that’s dramatically worse than the people that were luckier. “
FOR THOSE NOT “born in the right place at the right time.” – Passing Down Wisdom: How to Start a Family Investment Club
To become a successful investor in equities {stocks, ETFs, etc.) requires Financial Literacy and Critical Thinking. Sharing the Wealth: A Guide to Family Investing
Making Money Fun: A Guide to Teaching Kids About the Stock Market
- Get your kids off the phone and improve their communications skills
- It is increasing financial literacy for all members, significantly younger family members.
- Dispels fear of the stock market. I remember the first time I looked at the stock pages in a newspaper. I could not understand the data! It intimidated me.
- Learn the pros and cons of individual stocks, mutual funds, index funds, etc.
- Improve your investing Critical Decision Making.
- Pool family members’ knowledge to make better investment decisions.
- Bounce ideas and strategies on each other. Peter Lynch, former Fidelity Magellan Fund Manager, would get investment ideas by watching which stores his daughter and her friends shopped at.
- By pooling resources and making more significant investments, a family investment club may be able to achieve higher returns than an individual investor.
- It’s fun—more fun when you make money-winning investments.
If your family has little experience in the stock market/investing, I suggest utilizing a practice account until you get good! The wealth-based app is free for up to five people. https://www.wealthbase.com/
I still practice trading stocks and options to improve my competency. The good news, it is free, and on a bad/dumb trade, I lose zero real dollars.
Preparing the Next Generation: Family Investment Clubs 101
- Decide who will be in your club (family, friends)
- Provide CLUB MEMBERS with age-appropriate books, videos, etc., about money and finance to help them understand earning, saving, investing, and budgeting concepts.
- Draft your club rules:
- Method to teach/improve financial literacy {reading assignments, videos, podcasts, blogs, etc.}. Many investment brokerage firms have training sessions online. Your local library is a great FREE source of books, videos, etc.
- Decide how to fund the club.
- Each family member regularly contributes a set amount of money to the club’s account, such as monthly. Kids can hold fundraising events or activities to generate additional income. Designate a portion of any allowance to the Family Investment Club.
- Decide how to fund the club.
- Determine investment options: Index Funds, Stocks, etc. How are investment decisions made? For example, Majority or unanimous votes
- .How profits and losses will be distributed
- Name the club Example: POWERS SOARING RETURNS FAMILY INVESTMENT CLUB.
- If setting up an investment account, a couple of options.
- A parent creates a separate account in their brokerage account. Designation of this account for the family club. You can even name this account.
- Open an account in the club’s name listing all members. Advise starting with a practice account.
- Meet regularly to discuss investment strategies and make decisions about buying and selling securities. Develop a system for tracking the club’s investments, income, and expenses, and make sure all members have access.
- This is an excellent time to teach your kids about U.S. and State tax liabilities.
CONCLUSION: The Benefits of Family Investing: A Guide to Creating a Family Investment Club
The majority of you, and I mean 99%, are better investing in Index Funds. START WITH THAT. As you grow your investing competency with HARD WORK, try picking individual stocks if inclined.
It’s important to note that financial literacy is not a one-time event, it’s a lifelong process, and it’s essential to keep the conversation going and adjust the level of complexity as your kids age. The earlier you start teaching your children about money, the more time they will have to develop good money habits and partake in the magic of compound interest.
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REFERENCES
The Snowball: Warren Buffett and the Business of Life – by Alice Schroeder
Outliers – by Malcolm Gladwell’s
Below are several blogs on Critical Thinking and Financial Literacy.
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St Jude Hospital: https://www.stjude.org/
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Folds of Honor: https://foldsofhonor.org
Wilson’s No-Kill Animal Shelter: https://wcnkas.org
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https://wealthbuildingpowers.com/?p=14116
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Warren Buffett Says This 1 Simple Habit Separates Successful People From Everyone Else http://flip.it/_AzPx9
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THE ONE BOOK YOU SHOULD READ…….
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FINANCIAL LITERACY IS JUST NOT THAT COMPLICATED – TRUST ME!
https://wealthbuildingpowers.com/2019/04/01/financial-literacy-is-just-not-that-complicated-trust-me/
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ABOUT ME
I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger with an NC. State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.
I left a corporate career because I desired to make a difference as a speaker and writer. I was blessed to be coached and mentored by strong women and men in my family and professional life. It is my time to serve and give back.
DISCLAIMER
I started my first business at ~13 years of age (a small but brilliantly created plant nursery). I am a successful investor in stocks, options, and real estate and am happy to share my finance and investment lessons. I am NOT a licensed financial advisor. Please do not construe my suggestions on this blog as recommendations for your situation. As an investor, you must establish your risk/loss tolerance. Investment in any asset involves risk, including complete loss.
Please seek your licensed CPA or fiduciary financial advisors for individual financial advice.
I write this weekly blog to make an impact by reaching an audience and demonstrating the need for financial literacy. I will help you get there.
