How To Invest Kids' Piggy Bank Money?

[aliceindisneyland]

DS10 has $300 and DD7 has $200 in their savings accounts (Cap 1 360). They each add about $5 a month to these accounts [$1.25 - 50% - of their allowances each week go straight to savings]; they are always selling their toys, cupcakes to the neighbors, etc. so they could add more to savings each month, but they generally spend it immediately [DD]/save it for big ticket items [DS].
The savings accounts are sacred and not to be spent until they want to buy a car at 16 - so DS has at least 6 years to grow his money. Obviously they'll need to earn a lot more once they're teenagers to accomplish this goal!
DS got excited about the idea of investing his savings when I showed him a compound interest calculator.
I don't know what to do to get him started! I looked into some kid investment sites but read reviews that put me off. I'd like to find a way to invest his [and DD's] money in no minimum, no maintenance fee index fund that would let him add additional savings to the account monthly (it may be as little as $5) [is this called "dollar cost averaging"?].
Cap 1 has "Share Builder" and it looks like this may work, plus there's a $50 bonus right now. Has anyone used it? Your opinion?
Other banks/investment ideas/success stories?

 

[JillianMarie]

**Disclaimer: I am not affiliated with these guys in any way other than as a satisfied customer**

My brother recently turned me onto a company called Betterment. It's an interesting hybrid of savings account/mutual funds and I've had some good luck over the last little bit with returns. My brother, who has had an account with them for MUCH longer has had even better returns. It's not zero fee and there's some overhead, but it might be worth checking out because. Frankly, if you're interested in any passive growth at all, you're going to have to do better than a regular savings account product. That's why I like Betterment, it feels like a regular savings account but has already blown my (what used to be) high interest online account out of the water and it's a lot easier to access than mutual funds or brokerage accounts.

 

[mom2alix]

I learned about Loyal3 on this board. It's only limited stocks to choose from, but there are no fees to invest. Disney stock is one of the choices.

 

[Jeff_G]

With the low balance and small monthly contributions its going to be tough to find an "investing" account.

I wouldn't, you have 6 or 10 years for the kids to "invest", conventional wisdom says anything under 10 years should not be in the market unless you have a very high risk tolerance.

At this age you want to teach them to put money away for bigger goals, and to that end it sounds like they are on the right track.


Yes compound interest calculators are great but they do not take into account all factors on the actual market.

If the market were to have a big down turn right before your son wanted to purchase his car he is going to be upset and forever have a skewed view of investing.

I would become the interest payer for your kids. Tell them you will match (upto a certain percentage or dollar) what they put into saving account for a car. Sort of like your work might match your 401k. Encourage them to save from every "paycheck".

I know its hard to have the money sit in a boring savings account earning two pennies every month, my kids are in the same boat. But at 10 or even 16 I'm not sure they are prepared and able to understand market risks and they do not have decades to recover from a major market downturn.

I would talk about retirement accounts and how over 30 or 40 years putting money in every paycheck does add up.

 

[kymom99]

I like the idea of the parents matching the money saved.

My son has a little over $3000 saved and last year he made a total of $1 in interest through a goalsetter savings account at 5/3. I had put his money into CDs in the past, but they kept telling me to wait because rates were low and they thought they would go up "soon." We all know what happened there. I finally broke down and had them put his money into a CD a couple months ago. I think it is for 24 months. He will at least get a little interest and the money will be available without penalty by the time he may possibly "need" it.

Oh, and I only put $2000 in, that way if he decides he wants something, like a new guitar, etc. he can still get at some of his money. He is very frugal with his money, but not so much with mine!

 

[msmama]

With that little amount, you're not going to get much return. Do you have an account that you could add their money into, therefore earning more interest for everyone?

It'd take some math to figure out who gets what in the end, of course.

Otherwise, I like the idea of Bank of Mom and Dad. I remember loaning my mom money in high school (Cash, she had the money in the bank, but this was before ATM's everywhere) and charged absurd amounts of interest. I was apparently a bad kid, lol.

 

[wiigirl]

I like the idea of the parents matching the money saved.

My son has a little over $3000 saved and last year he made a total of $1 in interest through a goalsetter savings account at 5/3. I had put his money into CDs in the past, but they kept telling me to wait because rates were low and they thought they would go up "soon." We all know what happened there. I finally broke down and had them put his money into a CD a couple months ago. I think it is for 24 months. He will at least get a little interest and the money will be available without penalty by the time he may possibly "need" it.

Oh, and I only put $2000 in, that way if he decides he wants something, like a new guitar, etc. he can still get at some of his money. He is very frugal with his money, but not so much with mine!

 

[mm1971]

Both of my children get a good amount of $$ for birthdays and a couple holidays from the grandparents. It is their money so hard to just invest long term in case they want something. We keep about $1K in a savings account in case they want to buy something (with parent approval, of course). The balance is 50% CD's (not a lot of interest, but it's safe) and the balance has been invested in a MM (again, not great, but better than a savings account). We decided that risk was not something they could understand or reasonably decide to take or not.

 

[aliceindisneyland]

Thanks for the ideas! "Bank of Mom & Dad" - that made me giggle! I won't be matching anything for a car, but then we're the big meanies who also won't be paying for college or letting the kids wear out their welcome at home after age 18.
I'm completely comfortable accepting high risk for the current small amount he has; the exercise of making his money do something [besides sit at a fraction of a percent] will be great, I think - up or down. I would rather have learned money lessons with Monopoly money [he hasn't actually earned any of his savings so it's somewhat intangible to him] at 10 than with my real money at 38!
I love that Loyal3 offers stock in companies he thinks are great like Google, Amazon, Coke, and Disney! I'll look into that for sure, thanks!