Getting Kids Started with Investing

How do you get children interested in the stock market and instill a life long appreciation for the need to save and invest? The earlier you start interesting children in investing and saving, the better their prospects for a financially independent future. One way is to buy shares of specific stocks that kids recognize. Unfortunately on-line brokers that charge minimal commissions, usually require a minimum purchase of $1,000. Even through discount brokers, commissions on purchasing just one or two shares can be expensive. Rather than purchase individual company shares you may find itís cheaper to invest in a mutual fund that holds some of the above companies in its portfolio. There are a few that allow an opening investment of just $100. With a mutual fund itís easy for the child to make additional investments with cash gifts from birthdays or special achievements. You and your child will need to first decide on the companies and then compare your options based on convenience and cost-effectiveness. Regardless of whether you or your children are actually buying the stock or mutual fund, purchases for minors under the age of 18 must be made through a custodial account. An adult, usually one of the parents, is registered on the account as custodian for the child. That parent controls the account. The account bears the childís social security number, not the custodial parentís.

Wash Sales
If youíre looking for some tax deductions by selling stock on which youíve got a loss be sure you donít do what is called a wash sale. One way to reduce income taxes is to sell investments that you own on which you can deduct a loss. Itís important however not to incur what the IRS calls a ďwash saleĒ. A wash sale occurs when you sell stock or securities at a loss and, within 30 days before or after that sale you directly or indirectly buy substantially identical stock or securities. The deduction of the loss wonít be allowed...Read More