Help my 7 year old daughter invest $50 of her Christmas money

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bulgarian
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Help my 7 year old daughter invest $50 of her Christmas money

Post by bulgarian » Mon Jan 01, 2018 4:26 pm

Hello Bogleheads,

This is my first post on this forum, but I've been a long time reader. I'm posting on behalf of my daughter. She has saved up $113 this Christmas and wants to invest $50 of it. I helped her check the vanguard funds, but they have a $3,000 minimum, which makes them unavailable for her.
She prefers being able to sell the investments at any time that she wants, so something like a 529 is probably not a good option.

She has a strong preference towards buying "something for girls", but she seems to agree with her dad that good investments are investments that are primarily picked based on the likelihood of bringing good returns and that's what wise girls would buy.
She also said that she's OK with buying a $50 piece of America too. Her dad dislikes buying single company stocks, so would prefer to steer her away from them.

What ETFs, bonds, etc would you suggest for my daughter to buy? Thanks for your help!

aristotelian
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by aristotelian » Mon Jan 01, 2018 5:14 pm

SCHK through Schwab. You might have to help her out with an extra $2.50 or so to get two shares. I currently have 3 shares in my SEP IRA.

Nthomas
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by Nthomas » Mon Jan 01, 2018 5:18 pm

I would go with a Schwab mutual fund (e.g. SWTSX, SWPPX). No minimum and you don't have to worry about buying whole shares like an ETF. No $ left uninvested.

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ruralavalon
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by ruralavalon » Mon Jan 01, 2018 5:28 pm

For a $50 initial investment, she could consider Schwab Total Stock Market Index Fund (SWTSX) ER 0.03%.

The advantage of Schwab is the very low initial minimum investment ($1) required for their index funds. The disadvantage is the lack of a low ER balanced fund, with low initial minimum investment.
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celia
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by celia » Mon Jan 01, 2018 5:30 pm

The most important thing you want to consider is if the account has fees or not. No use paying $20 fees per year on a $50 account.

Do you plan to open a new account for her or buy something that is hers in your account? At this point, a new tiny account will feel more of a nuisance. Is she willing to take risks and see the price go up and down? How about a game instead that uses play money, such as monopoly?

blissed
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by blissed » Mon Jan 01, 2018 5:40 pm

Put it in a WiseBanyan account ($1 minimum, no fees) and they'll buy fractional shares to create a diversified portfolio and automatically rebalance.

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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by Yooper » Mon Jan 01, 2018 5:42 pm

"wise girls" would buy mom and dad a $50 gift card to their favorite restaurant and when presenting it to them would smile and say something along the lines of "You're the best mom and dad in the world. You do so much for me that now I saved up some money I can do something for you!"

Talk about "good returns". Pfft! Mom and dad would match that $50, and probably raise it another $50 the first opportunity they had (birthday, good grades, etc.) - - and continue to do so for quite some time.

ccieemeritus
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by ccieemeritus » Mon Jan 01, 2018 5:47 pm

+1 Schwab SWPPX although I don't know if $50 is enough to avoid fees.

quantAndHold
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by quantAndHold » Mon Jan 01, 2018 5:54 pm

Most things will have minimums that are greater than $50. I would either go with a high interest online savings account, or I-Bonds. I-Bonds aren't as liquid for the first year, but it's an investment in America, there are no fees, and she can track how much it's worth over time.

BigPrince
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by BigPrince » Mon Jan 01, 2018 6:01 pm

My dad introduced me to finance through Certificates of Deposit (CDs). Maybe something to consider.

OR

I would find a company started by a female entrepreneur and maintain it in your brokerage account on her behalf, but that might get her into a bad habit of stock picking.

onourway
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by onourway » Mon Jan 01, 2018 6:12 pm

Schwab is good, but I think you need a $1000 minimum even so, or, you need to set up a $100 monthly auto-deposit, or you need their checking account (in which case the minimum is $1).

Personally, we have UTMA accounts for just this purpose. Ours are with Vanguard where we buy ETF's. In retrospect it probably would have been a bit easier with Schwab where we have a checking account and could buy mutual funds, but in the end this is a small difference. My 6-year olds are already excited about checking their balance online with me.

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whodidntante
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by whodidntante » Mon Jan 01, 2018 6:31 pm

Start her off right with a low cost passively managed factor tilt. FNDA Schwab Fundamental U.S. Small Company. :happy

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F150HD
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by F150HD » Mon Jan 01, 2018 6:32 pm

bulgarian wrote:
Mon Jan 01, 2018 4:26 pm
She has a strong preference towards buying "something for girls",
...and she's 7.

Buy her shares of AVON https://www.marketwatch.com/investing/stock/avp

To further the lesson, maybe she can begin selling door to door in town.

Post a followup a year later if you would! Thanks.

tibbitts
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by tibbitts » Mon Jan 01, 2018 6:38 pm

I will just say that I didn't even know what the word investing meant at that age, yet here I am at Bogleheads.

Maybe invest in a savings account at the Bank of Mom and Dad that pays 100% annually. Hard to beat those returns. I don't think the amount of earnings from either a regular savings account or mutual fund will get much traction in the mind of a 7 year old - and the mutual fund account could backfire. I was a little older when my parents introduced me to equities, and the late 60s early 70s made a huge negative impression on me. Just understand that realistic early experiences can backfire.

Fallible
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by Fallible » Mon Jan 01, 2018 6:48 pm

If she wants to learn how to invest, be sure to show her the Bogleheads' Philosophy, beginning with having a plan, saving enough to invest, fees, risk, etc. That's the way all investors, even 7-year-olds, should learn to invest - before they actually put the money in.

Agree with others about understanding the importance of fees and their impact on her savings. And I agree with the poster Celia that playing that great game of Monopoly is another way to learn - while having fun. I began playing it around 7 or 8 and showed a frugal and conservative nature when it came to "money," although I didn't fully realize what that would mean until later in life (for one thing, it meant I was a Boglehead).

A book your daughter would like to read when ready is Allan Roth's wonderful How A Second-Grader Beats Wall Street.
https://www.amazon.com/Second-Grader-Be ... 0470919035
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mouses
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by mouses » Mon Jan 01, 2018 6:55 pm

I would put it in a savings account, and she can add to it from time to time with some (not all) of the money from birthday or Christmas presents or what she earns for doing extra chores. Then she'll see it grow. I don't think she has enough to fulfill the something for girls aim at the moment.

inbox788
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by inbox788 » Mon Jan 01, 2018 7:11 pm

Fallible wrote:
Mon Jan 01, 2018 6:48 pm
A book your daughter would like to read when ready is Allan Roth's wonderful How A Second-Grader Beats Wall Street.
https://www.amazon.com/Second-Grader-Be ... 0470919035
I'm not sure it's really meant for 2nd graders or whether they'd really like to read it, but if they enjoy that one, maybe this one would be a good followup with the remaining funds:

https://www.amazon.com/Bogleheads-Guide ... 118921283/

Alternatively, the best investment she can do with $50 is to SPEND it. Buy lots of favorite candies/ice cream and other things she wants. Someone once pointed out to me that it gets harder and more expensive as you get older to indulge. There are lots of $50 items (or less) that would bring a lot of joy to a 7 year old. You can invest it and get $100 or 200 in a decade, but what do you do with that by the time she's 18 year old that will be as enjoyable? Even twice or 4 times as much candy and ice cream will have lost some of it's luster. And does an 18 year old enjoy a new dress more than a 7 year old enjoys candy?
Last edited by inbox788 on Mon Jan 01, 2018 7:12 pm, edited 1 time in total.

JW-Retired
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by JW-Retired » Mon Jan 01, 2018 7:11 pm

bulgarian wrote:
Mon Jan 01, 2018 4:26 pm
She has a strong preference towards buying "something for girls", but she seems to agree with her dad that good investments are investments that are primarily picked based on the likelihood of bringing good returns and that's what wise girls would buy.
............................
What ETFs, bonds, etc would you suggest for my daughter to buy? Thanks for your help!
I would kick in another $950 so with her $50 she could buy the Vanguard STAR fund. IMO, that would be a great start for her.
JW
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Robert The Bruce
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by Robert The Bruce » Mon Jan 01, 2018 7:12 pm

My thought is that kids are very risk adverse and have a very short timeframe. I bet (no matter what she says today) she’s going to want to spend that money sometime in the next 5 yrs. How’s she going to feel 2 yrs from now when she wants to donate to a worthy cause and the $50 is only worth $40? A loss could greatly affect her impression of investing for years to come.

My thought is you need to hold it for her in a CD in the bank of mom. Give her a good rate. If that’s too boring, maybe you should agree to give her all of the total market index gain, but none of the loss. We’ll call it the “Bulgarian put”.
The stone age didn't end for lack of stone.

mortfree
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by mortfree » Mon Jan 01, 2018 7:16 pm

Leaning towards the bank of Mom and Dad.

As long as the $50 stays in her piggy bank she gets $5 per month.

The reason I would keep it in the piggy bank is it remains liquid to her and she can decide if she wants to spend it or continue holding it.

I would be careful in talking about why it won’t be invested as you don’t want to give her the impression that she needs a lot of money to invest.

MarvinK
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by MarvinK » Mon Jan 01, 2018 7:27 pm

I was going to say a 529, but that's out...so...
something for girls
I would steer her towards something a little volatile;
It gives her something to watch on a ticker. Watching a mutual fund gain $.01 - $0.10 is pretty boring for a 7 year old.
And the biggest lesson hopefully is that she could lose it all.
When I was young, I remember token gifts to a family member of 1 share of Disney. (what a great run though)
Times have changed, but there are a few companies she can relate to.
And some girls are interested in airplanes, engineering, etc. too.

Under Armour (sports clothes) on TV and supports female athletes
UA; considered undervalued http://www.morningstar.com/stocks/xnys/ua/quote.html

SNAP = Snapchat; she likely knows what snapchat is. It's leveled off since its IPO.

TWTR = Twitter

If you have to do a mutual fund, why not a sector fund Vanguard ETF that interests her? You'll probably have to help her get 1 share.

Good luck, I hope you post what she decided to do with her money.

shess
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by shess » Tue Jan 02, 2018 7:16 pm

bulgarian wrote:
Mon Jan 01, 2018 4:26 pm
This is my first post on this forum, but I've been a long time reader. I'm posting on behalf of my daughter. She has saved up $113 this Christmas and wants to invest $50 of it. I helped her check the vanguard funds, but they have a $3,000 minimum, which makes them unavailable for her.
She prefers being able to sell the investments at any time that she wants, so something like a 529 is probably not a good option.

She has a strong preference towards buying "something for girls", but she seems to agree with her dad that good investments are investments that are primarily picked based on the likelihood of bringing good returns and that's what wise girls would buy.
She also said that she's OK with buying a $50 piece of America too. Her dad dislikes buying single company stocks, so would prefer to steer her away from them.

What ETFs, bonds, etc would you suggest for my daughter to buy? Thanks for your help!
I found this book useful for ideas along these lines:
https://www.amazon.com/First-National-B ... 1416534253
One thing to note is that if you set the bank-of-parent interest rate too high, that can discourage investing practice (and also is quite unrealistic - you want them to get a feel for interest, not to have a new income stream).

My 13-year-old wanted to invest. I explained to him the various issues around bid/ask price, commissions, minimums, and taxes, and also indicated that there are other issues like ability for minors to have accounts in the first place, and also that the market was open while he was supposed to be in school, and there would be a zero-tolerance policy on distractions of that sort.

So what we did is worked out a system involving a spreadsheet and email and trust. His shares are virtual, backed by me. The spreadsheet is in Google Docs, so he can see his portfolio as desired. Trades are implemented at the open of the next trading day after the trade is received via email, values derived from Google Finance historical data after the fact. He can invest by dollar amount. Cash only, no margin. We've allowed a modest amount of trade variety beyond market orders - for instance, he can place a limit order to get intraday pricing (in that case, instead of just taking the open, it depends on if the stock crosses that boundary during the day). Mostly I've made him live with obvious consequences, like if he enters a stop-loss limit order and the stock opens below that amount, well, that's the stock market.

For the first three or four weeks, he was pretty busy, and I was a little nervous about what I had signed up to. Once he got a feel for how brownian the stock market is, he settled down a lot. Also, I can obviously rope him in to do work on this - if he wants me to update the spreadsheet, he can go do the research to figure out what the pricing was so all I have to do it add the numbers :-).

Obviously, with any system such as this, make sure you are good to take your end of the swap. I told him that I wouldn't be party to trading penny stocks or the like, both because I felt like it was a bad idea, but also because it was too risky from MY end, as I don't want to pay out 100x on something.

I suspect that you might find differences between a 13-year-old and a 7-year-old, though. At 13, he very much got that the entire system was just an electronic ledger, so while the version we worked out wasn't "real", it was "real enough".

gusan
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by gusan » Tue Jan 02, 2018 7:52 pm

Bank of Mom and Dad is fun. I gave my daughters (8 year olds) $5 in a store and told them if they didn't spend it would grow to $10 by the weekend (4 days out) and they agreed. The next doubling was a month later and when I checked 30 days later, they asked me if they can double again and I told them this time they need to wait 60 days and if they want to do it again it will be 180 days and as amount grows the time will grow too.

I do want to now give them the actual cash in hand and see if one or both choose to spend it or put it back in the Bank of Mom and Dad :) - although at this rate of return it is hard to resist for anyone I guess.

Marengo
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by Marengo » Tue Jan 02, 2018 7:54 pm

Last year my daughter wanted to buy some stock after playing "The Game of Life" with me. After talking about several companies, she decided on Target (TGT). To avoid fees and minimums, I technically own this one share if in my Vanguard brokerage account, but we know that it's hers. Every 3 months I give her the dividend. She really likes that part!

TheHouse7
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by TheHouse7 » Tue Jan 02, 2018 8:00 pm

Yooper wrote:
Mon Jan 01, 2018 5:42 pm
"wise girls" would buy mom and dad a $50 gift card to their favorite restaurant and when presenting it to them would smile and say something along the lines of "You're the best mom and dad in the world. You do so much for me that now I saved up some money I can do something for you!"

Talk about "good returns". Pfft! Mom and dad would match that $50, and probably raise it another $50 the first opportunity they had (birthday, good grades, etc.) - - and continue to do so for quite some time.
+1

Kids have no need for return, let her start a lemonade stand with the money :sharebeer
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.

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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by Fallible » Tue Jan 02, 2018 8:36 pm

inbox788 wrote:
Mon Jan 01, 2018 7:11 pm
Fallible wrote:
Mon Jan 01, 2018 6:48 pm
A book your daughter would like to read when ready is Allan Roth's wonderful How A Second-Grader Beats Wall Street.
https://www.amazon.com/Second-Grader-Be ... 0470919035
I'm not sure it's really meant for 2nd graders or whether they'd really like to read it...
Yes, and that's why I said "when ready," meaning when she would be able to understand it. And the OP might also be interested in it and explain It to her.
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Pajamas
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by Pajamas » Tue Jan 02, 2018 8:39 pm

$50 and 7 years old, a savings account would be best. It would give her a good financial foundation by getting her used to dealing with money and understanding basic concepts like interest, deposits, account statements, etc. Many banks have special accounts for children and most bank tellers still have lollipops or some kind of candy to hand out, too.

bulgarian
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by bulgarian » Wed Jan 03, 2018 11:05 pm

Thanks everyone for the wonderful replies. I did not expect this many interesting options and I'm facing overchoice (https://en.wikipedia.org/wiki/Overchoice).

I'm going to wait until the weekend when I'll have some free time on my hands to sit down and evaluate each option. I see myself agreeing with each of the answers for the same reasons that each one of you has.

I'm perfectly fine with matching her contribution up to 100%, or 200%, or allowing her to deposit her money in the bank of mom and dad. However; I would rather hold off on contributing another $950 to hers, because I feel that it would defeat what I'm after. My wife and I already contribute significant(for us) sums to my kids' college funds and I don't want to overdo it. My philosophy is that my money inflow is about fixed(my salary). We can divert a portion of the money to either my kids' future, or my wife's and mine. This is the tradeoff we have to make and I don't want to over-secure my kids' futures at our expense.

The books are definitely a good suggestion. She's been very much into reading lately and I think a good book will grab her attention.

I will definitely post some progress updates as we go through the process.

Dottie57
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by Dottie57 » Wed Jan 03, 2018 11:38 pm

Robert The Bruce wrote:
Mon Jan 01, 2018 7:12 pm
My thought is that kids are very risk adverse and have a very short timeframe. I bet (no matter what she says today) she’s going to want to spend that money sometime in the next 5 yrs. How’s she going to feel 2 yrs from now when she wants to donate to a worthy cause and the $50 is only worth $40? A loss could greatly affect her impression of investing for years to come.

My thought is you need to hold it for her in a CD in the bank of mom. Give her a good rate. If that’s too boring, maybe you should agree to give her all of the total market index gain, but none of the loss. We’ll call it the “Bulgarian put”.
I cannot imagine a 7 year old investing. Teens yes. Put it inthe bank.

DrGoogle2017
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by DrGoogle2017 » Thu Jan 04, 2018 1:07 am

My kids have savings account at this age.

billthecat
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Re: Help my 7 year old daughter invest $50 of her Christmas money

Post by billthecat » Thu Jan 04, 2018 2:12 am

What about matching her $50 with another $50, opening a Schwab custodial account (account min. $100), and buying a target date index fund such as SWYNX?

That would get her access to an amazingly diverse array of low cost investments.

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