The first step to investing

Welcome to the third post of my journey to build financial literacy for young adults. Today’s post is about the ups-and-downs we had in determining where to set up an investment account for my son. Hope you enjoy it and learn something useful...

Over the last few years, I’ve had many, many conversations with my children on the importance of saving and investing. Most of the time, my kids have either just ignored me or told me that I spend too much time talking about “Boomer” things. Like most parents though, I have hoped that my repetition of this subject will filter through and over time percolate into my children’s mindsets.

Several months ago, I had that breakthrough moment which parents dream of: my younger son came to me and said “Daddy, I think I’m ready and would like to make some investments”. He had saved two hundred dollars, mostly from his birthday gifts, and had finally decided to follow up on my incessant conversations. Needless to say, I was ecstatic — I had finally broken through to him and was getting him started early in his life on a path of financial responsibility. Mentally, I was congratulating myself on a major parental accomplishment.

Rather than be my typical helicopter parent and prescribe what he should invest in, I told him I was glad that he was interested in investing and that he should spend some time determining what investment he wanted to make and why. He would need to share those reasons with me and my wife. Assuming we agreed with his reasoning, we would make that investment on his behalf. I distinctly remember that conversation as I proudly went to sleep thinking both about my parental accomplishment and that I hadn’t succumbed to my helicopter parenting tendencies.

Unfortunately, reality quickly set in. A few weeks passed and nothing happened. I casually asked him what he was thinking and if he had an idea of the investment he wanted to make. He was noncommittal in his response so I just assumed that he needed some more time. Another few weeks passed and still nothing. I kept telling myself that I can’t be a helicopter parent and need to trust that he’d follow up himself. At the 3-month point, I couldn’t help asking him what happened as there had been no follow up. He told me that he’d done some research and that two hundred dollars was such a small sum of money relative to the fees he’d pay for a securities account that it wasn’t even worth it. So, he’d just moved on. When I asked about accounts with no minimum balance or account fees and no-transaction fee accounts, he just looked at me. He had obviously not gone that deep in his research and hadn’t learned about the options which could be available to him.

That night, feeling devastated that I had blown it in my approach to his learning and growth opportunity, I brought up his feedback with my wife. She told me that I wasn’t reading the situation correctly. She understood my desire to not do it all for him, but I needed to provide him SOME direction. I had essentially told him “figure it out!” and was expecting a 15-year to do so. Because he wasn’t sure how to do so and it was difficult, he had given up at the first obstacle. We talked about some options to give him some direction, but also retain the ability for him to decide how to proceed.

The next day, to provide him some structure, I did a couple of quick searches on the internet to find top-rated youth accounts. I shared those articles with him and said, let’s just do things one step at a time, starting with determining where to set up his securities account. I asked him to read those articles and do some more in-depth research and then rate those accounts on a few criteria:

• Minimum balance requirements

• Resources to educate younger investors

• Transaction costs

• Customer service reputation

• Anything else he felt was important

I gave him a 2-week deadline for doing the research and coming back to us with his top two choices.

Boy, was my wife correct! Two days later, he came back to me with his choices. That little bit of direction and structure had made it easier for him and he had enthusiastically dived into the research, which he completed very quickly. Fortunately, his top two choices aligned with the ones I would have chosen. Even more fortunately, one of them was with a company where we had an account so I thought that setting up a youth account was going to be easy.

I breathed a big sigh of relief that this personal growth opportunity hadn’t been wasted and told him that we would sit together and set up an account the following weekend.

In the next post, I’ll write about travails we’ve had in setting up that account and then getting my son started on determining his first investment. I look forward to sharing that next post with you soon.