Investing In the Stock Market As A Family

Investing Money Is a Family Affair

We often see children begging their parents for toys. I tell my children, "if we spend all our money on toys, we won't have enough to buy the really important things." This reply is usually followed by more requests and grumbling.

After watching a toy advertisement on TV, my five-year-old daughter declares that she would like to go to work to earn money for toys. I smile and explain that she is too young to work, to which she replies that it's not fair and I should buy her toys if she can't. That night, after I recounted this incident to my husband, and we decided to see if there was a way for her to earn money and learn the value of investing.

I know, many of you are shaking your heads, saying that she's far too young to understand. However, I believe that if children can see their money work for them, they will appreciate the value of money more, and not waste it on frivolous purchases.

I called my bank and started UGMA accounts for both of my children.  UGMA stands for "Uniform Gift to Minor Accounts." Each child has an account under their own name and social security number. There are some benefits to these accounts:

  1. Unlimited investments - there is no limit to how much money you can gift your child. However, this money is irrevocable, and you will not be able to transfer the assets back into your own accounts. 
  2. Tax advantages - the first $950 dollars in earnings is not taxed. If the earnings are between $950 to $1,900, it is taxed at 10%. Above $1,900, the earnings are taxed at the parent's marginal tax rate.
  3. Flexible contributions - anyone can contribute (grandparents, aunties, and uncles, etc.)

My plan is to purchase stocks that the children will recognize, such as Disney, and stocks that earn dividends. Every month, they can check their accounts to see if their stocks grew in value and how much dividend they earned. I will give them a choice: to leave the money in the account for future stock purchases, or to take out the money to buy a small toy. Here, a discussion about the beauty of compound interest can be introduced.

How to use the compound interest calculator

1. Type in a starting amount (add the "$" in front of the number)
2. Type in an interest rate (add an "%" after the number)
3. Type in the number of years the investment will grow

Investing With Your Significant Other

Since I began investing, I noticed that my daily conversations with my husband always end up with a discussion about the stock market. We talk about how the market performed that day, what interesting companies we read about in the news, and a comparison of our portfolios. Recently, he has started asking me for suggestions on what to buy. For me, investing has provided a valuable opportunity for my husband and I to share and support one another. 

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