Kids can learn about market by buying stocks

One million. Now, that’s a number that should capture any kid’s attention.

Add billionaire investor Warren Buffett to the equation, and you just might have a way to introduce a teen to investing in the stock market.

Last fall, America’s best-known stockpicking wizard predicted the Dow Jones Industrial Average would eclipse one million in 100 years. To put that in perspective, the Dow hovered near 25,000 early this year.

A century ago, the Dow was at 81, hence Buffett’s optimistic prognostication.

Coming out of the holiday season — when many kids have cash gifts that may be burning a hole in their pocket — it’s a good time to teach them about the risks and rewards of investing. And I can’t think of a better way to do it than owning a part of their favorite company, like Disney, Nike or Apple.

There are a number of ways to help youngsters get started in stocks.

One-share ownership: One of my favorites is GiveAShare.com (www.giveashare.com), an online company that specializes in selling one share of stock in more than 110 companies.

GiveAShare also sells stock certificates, either authentic or replicas if companies no longer issue paper certificates of ownership. Having something tangible makes investing easier to understand.

By owning a share, youngsters are entitled to declared dividends, annual reports, invitations to annual shareholder meetings and perks, such as product freebies or discounts. GiveAShare also offers an “I’m a Shareholder” book to teach young investors about the market.

Because GiveAShare is not a traditional investment firm, you would need to go through a brokerage firm when selling shares.

Another good stock-purchasing site tailored to young investors is Stockpile (www.stockpile.com.).

You can purchase fractional ownership from among more than 1,000 companies, including every stock in the Standard & Poor’s 500 index. Once the account is set up, you can start buying for as little as $5.

You also can go to BusyKid, an online allowance and money management program (busykid.com) to buy stock through Stockpile.

Be a drip or a dip: Take advantage of the more than 1,600 companies (www.dripdatabase.com) that offer so-called dividend reinvestment plans (DRIPs) or direct investment plans (DIPs). The list of companies offering this option include Coca-Cola, Costco and AT&T.

It’s a great way for small shareholders, who already own a handful of shares in a company, to buy additional shares directly from the company for little or no fees.

Take baby steps: If you want to break your kids in slowly to the stock market, pick some public companies and track their prices for a few weeks. Since you’re not plunking down money to buy shares, there’s no risk with this lesson.

Join an investment club: As a teenager, my youngest son formed an investment club with a group of his friends. Several parents helped with the ground rules and the structuring of the investment accounts but left the kids to figure out what to buy and sell. Club meetings often included a guest speaker from an investment firm to talk about the markets.

While it can be a fun social experience, some valuable lessons can be learned from making money on a stock pick. And the lessons learned from losing money on a stock might be even better. Warren Buffett learned those lessons before he finished college.

Questions, comments, column ideas? Send an email to sbrosen1030@gmail.com.