Investing for kids

I’ve been researching ways to invest with Ethan and came across this information on “The Power of Compounding”.

Imagine investing $2,500 when a child is five years old and another $2,500 when he is six years old and turning that $5,000 investment into more than $1 million by the time the child is ready to retire! (This growth is based on an average annual rate of return of 10%–a conservative estimate of the stock market’s historical average annual rate of return.)

And you can make those results much more dramatic! Say you were to invest that $2,500 until he or she reaches 18 years of age. Your total investment over the 14 year period would be $35,000. That investment could be expected to grow to over $6 million by the time the child retires! (results of compounding based on an average annual return of 10%) (Which is the growth rate–including dividends–of the market in general over the long term, according to Ibbotson Associates, the Chicago based research firm).

This is my plan: open a joint brokerage account with Ameritrade in Ethan’s name? Once your child has a thorough understanding of the stock market and how it works, help them invest real money by opening a joint brokerage account with you as the custodian. You can allow your child to choose his own stocks or sell shares of your stocks to your child. Once he turns 18, he can open his own account and transfer his shares into it.

Read more: How to Teach Children to Invest & Have a Portfolio | eHow.com http://www.ehow.com/how_7764147_teach-children-invest-portfolio.html#ixzz250a7pOy8

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