|
I think the stock market is a lousy way to teach kids about investing. In fact, I'm not even convinced that interest-bearing accounts are of much use to kids. The time value of money is significant to a kid. Consider a kid with, say, $500 from babysitting or lawn-mowing. This could buy the kid, say, a really nice bicycle (+ helmet, lock, rack, basket, chain lubricant, etc. Assume they're old enough that they won't outgrow it for a while.) Alternatively, the kid could wait a year and expect to have an extra $20 (given the 4% annualized inflation-adjusted return on the market - what, you're investing, right? not gambling? then you get 4%. :P) Which would you choose: about $20, or a year with a bicycle? Opportunity cost! And the $20 will just about cover the commission on trading. Ouch. Transaction fees. The reason that the stock market is attractive to adults is that we generally have an adequate supply of Things that we need to make use of our time. There isn't another object we can spend $500 that will make that sort of an impact on our lives. Diminishing returns! (Also, we have tens of thousands of dollars, so we can invest without being slaughtered with fees.) |