The Best Way to Invest Money for Kids
One of the most important lessons that parents can teach their children is the value of money. This lesson can give the child a head start once he begins earning money later in life, whether the money comes from an allowance or a summer job. Investing a child's money will help him save for future goals, whether he plans to purchase the hottest new gadget or is putting money aside for college.
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Instructions
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Set up a savings account. Look for banks, either locally or online, that offer the highest interest rates. The money in this account should be kept separate from money the child will need in the near future, which can be kept in a checking account. The latter is a better option if the child is older and will need to access her money sooner.
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Purchase a savings bond. This transaction can occur at a local bank and is most suitable for a child who will not need access to the money for an extended time, such as 10 or 15 years.
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Purchase stock in a company. This can be done through a financial adviser. Explain to the child that buying the stock is akin to purchasing a small chunk of the company. This is a prudent investment if the child is young and will not need the money for several years.
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Invest the money in a mutual fund, which can also be done through a financial planner. A mutual fund will allow the money to be invested in a more diverse fashion than with a single stock. The money may purchase stocks in several companies or bonds from different sources. This is a less risky choice than investing in an individual company, but the returns may not be as high.
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