Pretend stock market for kids

Read how young adults are turning their computer hobby into a money making proposition, by investing and trading online. Kids with an interest in computers and computer games probably read PC , Wired , EM2 , and similar magazines.

They see people in their 20s who were formerly called geeks but now are creating the fastest-growing Internet companies. Kids also see how these companies have gone public and have made these young owners instant millionaires. So, the idea of the stock market isn't an unfamiliar one to many kids.

In fact, Wired has started tracking its own stock index made up of many so-called tech stocks, such as Dell Computer and AOL, but also stocks for the next century as well, including Walt Disney, Sony, and Wal-Mart. Ask a young subscriber, and he's probably familiar with these companies—he may even follow the ups and downs of the index in the magazine each month.

It has been estimated that at least 5 million ordinary people non-professionals trade online at least once and a while, and the Securities and Exchange Commission anticipates that the amount of online trading will double in Given the reduced commissions charged on such online trading, it can be expected that this activity will increase as people become more comfortable with the privacy protections for online trading.

Starting at a young age to use the computer for investment activities is a smart way to start a beneficial lifelong habit. For example, a high school child who's used to looking up stocks on the Internet can easily continue to track his portfolio when he goes off to college.

Kids can buy and sell stocks online in the same way as adults can. For children under 18, the account must be set up as a custodial account, and unlike regular accounts, custodial accounts generally can't be opened online.

Instead, you must request an account form which you can do online and then submit it by mail. If you and your child want to do online trading, make sure that you understand the technology. Read up on all the information that the online brokerage firm provides. High volume trading can delay the execution of your order and cause the price that you ultimately pay to be radically different from what you expected.

Instead of a market order , which means you'll pay whatever price the stock is trading at when your order is executed, consider using a limit order , which means you'll buy at a price you specify or one that's even lower. Custodial accounts are supposed to be managed by the custodian typically that's you, the parent.

Customer agreements state that only an account holder of legal age will trade online. As a practical matter, however, once the online account is in place, there's no real mechanism to prevent the kids from doing their own trading. A broker talking to an investor won't take an order from a minor, but the computer doesn't know the age of the person who's imputing the information.

It remains to be seen whether the industry will put any controls in place to prevent direct trading by minors. Who's left holding the bag? Without industry controls in place to prevent online trading by minors, it's up to you as a parent to monitor your child's activities. You can't help but see articles from time to time in your local newspaper about how a year-old has made millions by trading online.

But that's the exception that's why it's newsworthy. Your job is to provide necessary controls on what's otherwise a very easy investing process. Here are some of the strategies you can use to avoid online trading catastrophes:. If you don't want your child to do online trading without your permission, don't give him your account password.

Unlimited access may cause problems if a child puts in an order to buy something that costs more than he has the funds to pay for.

Once the account is in place, a child can decide what to buy or sell. There's no broker making specific investment suggestions, so it's up to you and your child to make the stock picks. However, the same fundamentals used in investing in the conventional way explained in The Rewards of Stock Market Investment apply with equal force to online trading.

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Read articles and find tips and useful information on raising your child to be resourceful with their money. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books , a member of Penguin Group USA Inc. To order this book visit Amazon's web site or call Harvard Rescinds Students Over Posts: The Risks and Rewards of Virtual Reality.

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Breadcrumb Home Kids Earning Money Online Trading For Kids. Online Trading for Kids. How to set up an online trading account Staying on top of investments.

How to set up an online trading account Kids with an interest in computers and computer games probably read PC , Wired , EM2 , and similar magazines. Kids today are now using computers for two key investment activities: The process is quick and direct, and the commissions for online trading are less than those charged for making conventional trades.

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For example, Charles Schwab charges less for its online trades than it does for its conventional discount brokerage trades. Some online firms, such as Ameritrade, charge a flat, modest fee no matter how many shares are purchased or at what price.

Online trading isn't limited to stocks, either: It's also possible to buy mutual funds , bonds, and other types of securities online. Dozens of resources out there make things easily accessible and cheap. For example, instead of paying a subscription to a financial newspaper, much of the same information can be found on the Web for free. Financial Building Blocks It has been estimated that at least 5 million ordinary people non-professionals trade online at least once and a while, and the Securities and Exchange Commission anticipates that the amount of online trading will double in Piggybank on It If you and your child want to do online trading, make sure that you understand the technology.

Watch Your Step High volume trading can delay the execution of your order and cause the price that you ultimately pay to be radically different from what you expected. Watch Your Step If you don't want your child to do online trading without your permission, don't give him your account password. Parenting isn't always easy. Get the latest expert parenting advice to your inbox every week. The Complete Idiot's Guide to Money-Smart Kids by Read articles and find tips and useful information on raising your child to be resourceful with their money.

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