I have been sitting on a small sum that the kids grandfather transferred us for them a few years ago. Having heard Scott on the MF podcast and seen this conversation, I made my first tentative steps into investing for my children this week. They have about $7k each to invest - took the view that I'd give them 3 stocks to pick and invest about $2k in those picks and then split balance between an Australian index ETF and a NASDAQ ETF. So far my son (9 year old going on 10) has said he wanted "Kmart" and Tesla - my daughter (7 year old going on 15) "Smiggle", "Kmart" and Mr Toys (I have no idea if this can even be bought). So I bought about $600 worth of WES for son and daughter and $600 of PMV for daughter. So it's really day one today. Talking my son through the purchase (we are down about $12 so far on WES).
Me: So I bought you those shares in Kmart we talked about - it's actually a company called Wesfarmers - did you know it owns Bunnings as well?
Son: Great - so how many shares do I own?
Me: 13
Son: So if there's 14 shares in the company do I own most of it?
Me: Yes that would be technically right...buuuut there's more like 750 million shares so you don't own a lot, but you do own a small piece of it.
Son: (completely ignoring me) so I own most of Kmart now...when can I buy most of Tesla?
Me: as soon as I set you up on international trading, but there's like a gazillion shares, so you won't own much of that either.
Son: Awesome! So when I own most of Tesla, I'll be the richest kid in the world...
Me: Sigh....
Off to a good start!
I looked into this a while ago as I wanted to give nieces and nephews some shares on milestone birthdays - 13th ($500), 18th ($1k), 21st ($1k) to hopefully provoke an interest in investing.
I found it too difficult to do this directly so I simply set up a separate brokerage account with low brokerage charges - I used Bell Direct ($15 bro).
Then I buy usually a few 'lot's of $500 (being the minimum AS trade size) in growth shares I hold that I think will do well over a few years, when prices look good. No dividend payers to keep it simple.
I then write them up a one pager on the shares and the process to include in a birthday card at the time.
I track all this in XL and make up a P&L for them to show them each birthday, but so they can also do the numbers based on current share prices if they like.
The deal is if they want their cash out at the next milestone, it's theirs. If they want to roll over I will add more shares at the next milestone with final cash out aged 25.
I use both a family trust and an account with parent as trustee for the child.
Family trust as part of the bigger family pie, and minor account for BRK.B, a few low dividend ETFs and a token amount of Disney because it gets the child interested. I drip feed into the minor account monthly to demonstrate the benefits of DCAing over time.
BRK.B is the main investment and was chosen because it has never and is unlikely to ever pay a dividend, I trust Berkshire to beat the market, and it avoids the unearned income tax on minors.