Family Wealth and Estate Planning News You Can Use
Teach kids about investing, teamwork
New York Times
Published on: 01/05/08
Tom Rogerson has seen his share of families bickering over money, often because they were utterly unprepared to handle it.
"The first time children make decisions together about significant wealth, it is usually some time around settling the parents' estate," said Rogerson, the director of family wealth services at BNY Mellon Wealth Management. "That is a bad time for siblings to learn about making decisions as a group."
Rogerson, 51, the father of two girls and two boys, has them off to an early start learning investing as a group. Ted Beck, president of the National Endowment for Financial Education, is teaching the same lessons through garage sales.
Six years ago, when they ranged in age from 5 to 15, Rogerson and his wife, Cathy, decided to entrust them with $5,000 each year. The children were to invest the money, which would be used for the family's summer vacation.
If the fund prospered, they might "go to Disney World," he said. "If it stayed flat, we would go around the country and visit family members," Rogerson said. "If the investment fell, there was always a camping trip."
The point of the investment experience is learning to work together to make intelligent decisions about money, and that's important, several experts said.
It is important to explain how stocks and bonds work and to teach the art of working together in an emotion-laden family setting, several experts said.
Joline Godfrey, author of "Raising Financially Fit Kids," said, "Any teaching that goes on for several years gives a clear message that it takes time to build a financial base."
Rogerson turned his kids into investing guinea pigs in 2001 - a bad year for the domestic stock market, as it turned out. "The kids knew nothing," he recalled. "They bought stocks like Apple and Hasbro and all these penny stocks at high-tech and toy companies. Their pile went down from $5,000 to $2,000."
That year, the family went camping.
The next year, the children were so nervous about "putting Mom and Dad back in a tent again that they eventually put all the money in money market accounts," he said.
"They made $50," he added. "That year we drove down to Florida to visit family." By the third year, the investing bug had bitten. The children bought stocks that were more conservative: a diversified portfolio that included large-capitalization stocks. They also had fixed-income investments like bonds. The young investors earned $600 on their $5,000 that year, and the family rented a catamaran and went boating near Mystic, Conn., which they chose over Disney World.
Beck said he and his wife, a former banker, were determined to talk to their children about finances at their individual paces, but the couple also wanted them to work together. They settled on garage sales.
"It was interesting to see how they divided up their roles," Beck recalled. At an early sale, one daughter, Katherine, then in junior high school, handled pricing because she had already gone to garage sales with friends; she took a leading role in the project.
"They split the $100 that they earned," he said, "but they agreed not to split it equally because Katherine had done the most."
Of course, convincing children to work together when they are young is no guarantee they will do so as adults.
The hurdles are far higher, Rogerson said. Spouses may complicate matters, and insidious rivalries can grow out of envy and mistrust. But he said early sibling partnerships, as he calls them, can help counteract those tendencies.