First Person: Choosing Where to Invest the Kids’ First $1,000

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A recent US New & World Report article entitled, "How to Invest Your First $1,000" got me thinking about our own family. While we aren't well off and don't have a lot of extra money to invest, we do our best to get our kids interested in personal finance and have tried to start them off on the right foot when it comes to saving.

Therefore, we've made certain moves for them as youngsters, investing their first $1,000 for them early on in an attempt to give them a head-start. But the investment choices for each child in our family have varied.

Child #1: A savings bond

Savings bonds might be one of the more boring investments for a kid, but they can also be a secure way to stash that first $1,000 for the long term. My wife received government savings bonds as a child, and that is also where we put our first child's first $1,000.

Personally, we prefer the I series savings bond since their interest rates are tied to the consumer price index in order to combat the effects of inflation.

Child #2: Precious metals

For our second child, we took a completely different route when it came to that first investment. When grandmother asked what would be a good investment gift for the new baby, I gave her the idea of silver. And while that initial investment wasn't quite $1,000 (20 silver ounce rounds came in at about $600), it made for a nice little start to the child's investing career and made for a unique investment gift.

The Silver Eagle ounce coins were easily purchased at a local coin shop at a slight markup over spot value.

Child # 3: Savings account

As a child, my first $1,000 was invested somewhat boringly. It was scrimped and saved from holidays and birthdays over a period of years and then put in a regular old savings account. But this doesn't mean that this form of savings was a bad option. First off, back then interest on savings was a bit more worthwhile than nowadays, and second, I learned the value of saving on my own, was able to watch my savings grow, and learned about the power of compound interest.

Option #4: DRIP (dividend reinvestment plan)

One option that our family hasn't taken advantage of but might, should we have a little extra money to invest for the kids, is a dividend reinvestment plan or "DRIP".

The longer such plans can have to work, the larger they can grow. I myself have my retirement account invested in such a plan, with monthly dividends being reinvested in the fund to grow share total over time. While I'm already halfway to retirement, being able to start the kids off with such a plan -- even with just $1,000 -- while they still have 60 years or more until retirement could leave them with a substantial balance should they leave it untouched during that timeframe.

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Disclaimer:

The author is not a licensed financial or parenting professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.

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