Start early to teach children about investing their money

Char and Bob Edmiston of Mount Prospect were never sure how much of what they tried to teach their children about the world sunk in. Avid investors in real estate and the stock market, the Edmistons would naturally discuss such matters over dinner each night and business reports were a family staple on the television.

Char would also talk about the ups and downs of the women’s investment club she had helped found and she and Bob would discuss the good and bad points of owning rental units. Family field trips to the occasional stockholder meeting — McDonald’s, Disney, Berkshire-Hathaway — were also part of their children’s lives as they were growing up.

But they never forced it down the throats of daughter, Julie, and son, Robb. Instead, the Edmistons simply immersed their children in their own interests and nature took its course.

Today, both of those now-adult children are avid investors themselves and they have already purchased shares of stock for their toddlers as a way to save for their college educations.

“My parents took me to the McDonald’s annual meeting when I was about 14,” recalled Rob, 28, “and I remember my mom showing me how to read the stock market ticker and telling me that it was important to pay attention to the news about different companies.”

By the time Robb was 17 or 18 and had a job, he asked his parents to buy him 30 shares of Microsoft and with each paycheck, he gradually paid them back. Seven years later, he was able to sell those Microsoft shares in order to buy an engagement ring.

More recently, when he and his wife, Theresa, needed to make improvements to their home, Robb sold more of the stock he had been accumulating in order to finance new carpet, a refrigerator, floors, a new bathroom and assorted cosmetic improvements. So his portfolio is currently depleted. He currently only holds Google stock. But his home has been nicely improved, thanks to the wise investments he has made over the years.

“I never invest all of my money,” Robb said. “I only hold two or three stocks at a time, watching them carefully and trading as often as once a week, making money on the volatility in the market. And I generally track them for weeks before I buy them.”

“I buy stocks when I hear bad news about quality companies which make things that people need to use. For instance, I bought Google when it was having all that trouble in China. That is when you can buy at a good price. And I always have a sell price in my mind from the time I buy it. When it hits that price, unless things have changed, I sell,” he explained.

Now he is investing for his 20-month-old son, Ryan. Robb was disgusted when the $1500 they had received in christening and birth gifts only earned three cents in interest the first quarter after they deposited it in the bank. So he decided it would be smarter to invest the money and bought his son three shares of Apple and ten shares of Exxon-Mobil. Since he purchased them Apple has gone from $208 per share to $350 per share and Exxon-Mobil has gone from $65 per share to $82 per share, giving Ryan a nice little profit on his money, especially when you add in the Exxon-Mobil dividends.

Robb’s sister, Julie, 31, has joined that women’s investment club with her mother and is also investing in stocks for her 22-month-old daughter, Bella.

And both babies can expect to get a fancy share of framed stock along with all of the benefits of stock ownership from Grandpa Bob for their next birthday. There are three companies that offer such a service: giveashare.com; oneshare.com; and giftsofstock.com.

“Children may or may not be receptive to what you have to teach them but it is amazing to me how much sunk in with my children,” Char said. “I felt it was important to get them involved in investing and budgeting when they were young. That is the time to make mistakes and learn from them — not when you are older.”

Robert Kiyosaki, author of the “Rich Dad Poor Dad” series of investment books, might dispute the Edmistons’ choice of the stock market for investments, since he considers it too risky. But he would never quibble with their real estate investments, nor with their manner of instilling an interest in investing in their children.

Kiyosaki learned most of his investment techniques from the rich father of one of his friends. Over many lunches with that surrogate father, whom he refers to in his books as his “Rich Dad,” Kiyosaki learned the ins and outs of real estate investment, primarily. His own father, an educator, the “Poor Dad” mentioned in his books, was not interested in investing and felt that his son should just get a good-paying job and save his money in a savings account.

During his adult life Kiyosaki has made most of his money from passive income through investment in real estate and other businesses like oil which offer massive tax breaks. His goal has always been to support himself and his family through investments alone and he has succeeded.

Kiyosaki advocates teaching a child about money as soon as they show an interest in it — usually around 3 or 4 when they want money to buy candy.

“My Rich Dad gave me three piggy banks and told me to put 10 cents out of every dollar I got in the savings piggy bank, another 10 cents in the investing piggy bank and another 10 cents in the tithing piggybacks for charity. I still got to spend 70 cents out of every dollar, but I was developing the mental habit of putting money away for investing, savings and charity,” he recalled.

“Today that has turned around. I spend 30 percent of what I make and invest 70 percent,” Kiyosaki said, laughing.

He believes that a child will learn more from watching what a parent does than from what that parent says. If you spend more than you make, you are poor, under his definition. Conversely, if you spend less than you make, but live up to your means, you are rich.

Kiyosaki also believes that children subconsciously take note of what their parents do in their free time. If they are watching mindless television, that sends one message. If they are instead, studying about investing or watching business television programs, that sends another message.

He also suggests that parents should actively engage their children in investing questions and games that teach them to think critically. Play Monopoly with your children so they learn about building those houses and hotels and winning the game.

And when they get older, teach them to watch relative trends, like the cost of gold, and ask them what they think will happen to their money if that trend continues. Answer: the dollar will be worth less and less as the price of gold increases and the Federal Reserve prints more money. So pose the question of why put all of your money in dollars and not in gold, silver, real estate, etc.?

If you think your child will learn best by having something he can hold in his hand, take him or her to a coin shop and help them purchase a silver eagle coin, Kiyosaki said, and watch its value increase. Or, if you own rental units like his Rich Dad did, take that child with you when you go to collect the rents once a month. That can be a very eye-opening experience for anyone, he said.

Kiyosaki firmly believes that the parent is the best teacher when it comes to investing because it simply isn’t taught in schools — not even most colleges.

“But the parent must keep up to date on what is happening and know what they are talking about because if the parent doesn’t have a clue, how can the kid ever have a clue?” he asked.

Consequently he advocates singles, couples and young adults signing up for investment and real estate courses in order to educate themselves and eventually, their offspring.

Teach them the difference between ordinary income from a job or a 401(k); portfolio income from stocks held outside of a 401(k); and passive income from real estate holdings, royalties, etc. All are taxed differently and the highest taxes are on ordinary income. Consequently, he said, it is important to make as much of your income as possible through your portfolio and passive income.

The younger children learn these and many other investment principles (like how to use debt to make money), the better off they will be, Kiyosaki said.

Kiyosaki is the author of 15 books on investing and has also created the “Cashflow” series of board and computer games for adults and children. Log onto richdadpoordad.com for more information.