Financial Literacy Via Rubber Shoes and Skateboards
Whenever I read stories like this, I am gobsmacked. Such as a recent experience where I learned that a participant in a work-related focus group (I work for an equity options brokerage) was only 18 years old, and he has an active trading account invested in equity derivatives of all things. (And he said very smart things in the focus group).
I did not develop anything remotely like "investing literacy" until I was in my 30's, and what I know now tells me that my 30's is twenty years too late. Financial literacy takes a long time to master. And literacy is only one aspect of it. Mastering the concept of risk not only takes a keen intellect, but emotional maturity. How do parents teach these concepts to their own children when they themselves lack the skills, will, and guts to do it themselves?
My feelings of awe at kids that invest is similar to my feelings of awe (and jealousy) when I see small kids ski - they ski without poles and fall with giggles. But most importantly, they get back up after a tumble with an effortless roll that seems to defy gravity. Amazing.
From "Kids invest in their future - literally" by Gabriele Steinhauser in the Chicago Tribune: [via Ed Knittel]
The past year has not been good for stock investor Ashley Berman. Shares of Mattel and Hershey's lost roughly a third of their value, while Disney and Chicago-based Tootsie Roll fell nearly 10 percent and 20 percent respectively. Then, in mid-January, Ashley saw that the market took another hit.
So when Ashley was 2 years old, Berman bought stock in four companies he thought would interest her: Disney, Wrigley, Hershey and Mattel. "At the age of 5, she picked her fifth one, which was Tootsie Roll," Berman said.
"I didn't really know what was going on," she remembered. "I didn't know what would happen to my stocks."
But unlike many stockholders across the United States, Ashley, who lives in Cranberry Township, Pa., didn't panic or feel pressured to sell. One of the key reasons for her lack of alarm: she is only 10 years old. [...]
Knowing what's of interest to your friends can lead to good investments, as Jacob Wondolowski, 13, of Denver, has learned. Seeing the popularity of Crocs, the colorful rubber slippers, Jacob suggested that he and his three older siblings invest in the company
"We looked at their stock, and we liked it," said Jacob's sister Valerie, 16. "So we put an option on it." With stock options, a trader pays for the right to buy or sell a company's stock at a predetermined price before a specified date, essentially betting on whether the stock's price will go up or down. Jacob and his siblings started buying and selling stock options last fall, after learning about them in a class they attended with their father, an investment adviser.
Through their father, the siblings invested $900 in the company that sells Crocs, money they had saved from shoveling snow, walking dogs and doing other odd jobs in their neighborhood. Jacob's retail radar paid off. They sold the options after one month for a profit of 33 percent. [...]
"I was like, I can do better than that," recalled Jordan, now 16. So his father let him invest his retirement money — around $100,000. Jordan, who had been studying the markets for a few years, suggested buying stock in Zumiez, a skate and snowboarding retailer. By the time they sold their shares last summer, the price had nearly doubled.
Gong Szeto
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I tracked stock when I was a kid. My first stock was Coleco. It went bankrupt. And from that moment, it was no longer interesting to me. Perhaps I was a risk adverse kid. Actually, strike that, I know I was. I hated falling down. I didn't like failure. And I was really adverse to injury. (It's why I was a swimmer, it's fairly safe in the water, no skinned knees.) Then again, even when I was a toddler, I didn't seem to have a natural instinct to place my hands in front of me when falling. I would just fall flat on my face. So perhaps I am an outlier. Although, but few of my friends as a kid were open to experimentation and failure either.