Last time I mentioned that I’d been neglecting my own kids’ stock investments. I was planning to fix that when I visited them in the English countryside last week. But before I get into that, let me explain why I’m talking about stocks in the context of Bomad in the first place.

Bomad is an easy way to introduce kids to money. It facilitates transactions (i.e. parents pay, then deduct from the virtual balance in the app). It’s low-cost and low-admin, and the transactions are supervised. It’s a great way to teach kids basic money management.

But I think that’s only half the problem. You also want to encourage your kids to save and accumulate assets over time. Real assets, not just IOU’s from their parents. That’s why Bomad has “external accounts”. Let me illustrate with my daughter Michelle’s Bomad:

The top section in red are the virtual IOU accounts. She’s organised them into a few different subaccounts, but they’re all still just money owed to her by her mother and me. Currently we owe her a grand total of £118.27. 

The bottom section in blue are real assets belonging to her. Some were gifted (we once gave her a gold bar for Christmas), but others were bought with the money we owed her. For example, when she’s saved up £50 in the “Save for Bitcoin” account, we deduct it and actually bought Bitcoin for her. Currently the total of these real assets is £681.59.

So the idea is that over time money flows from the top to the bottom, and your child slowly builds assets over time. Buying stocks is probably the easiest way to do this.

As I mentioned, I’d been neglecting this for my own kids, but unfortunately I didn’t have nearly as much time as I hoped last week to rectify it as our agenda was quite full: we camped at the school, we visited chef schools in London (my son Andrew wants to be a chef when he finishes school next year), we went on an Amazon fulfilment centre tour, and we got last minute tickets for Taylor Swift at Wembley:

Nonetheless, I did manage to have a conversation with each of them, and here's the report back I promised:

Andrew

We reviewed his portfolio together. It's quite small, worth around $220, and consists of only 3 stocks: a fund that owns farmland, another that owns gold, and Roblox:

I think this is a pretty good start to building a nicely diversified, long-term portfolio. Andrew, however, was quite annoyed that he was at break-even after holding these stocks for 6-12 months. In particular, he wanted to sell the farmland fund which had declined slightly.

Now, as the guy who sold Telsa shares in December 2019 because it had gone nowhere for a long time, I regarded this as a particularly bad decision:

He agreed to hold off on selling, but he wasn’t very open to any further guidance from me. Perhaps it was just a bad time. I decided not to press the matter. He said he would give it further thought and we agreed that we would speak again in a week or two.

Later I wondered whether he might be better off just buying an index fund (like VOO or SPY). I’ve never been into index funds. It seems like much more fun to buy individual companies. But perhaps this would suit him better.

I think I just need to keep talking to Andrew about this. I’ll see where his interests lead us. Hopefully I can encourage him to adopt the habit of investing some of his income. Time is running short though, he’s already 16.

Michelle

Michelle is 10. She has a tiny portfolio ($110) that consists exclusively of Roblox stock. I was keen to encourage her to buy something else with the extra money she had in Bomad.

We spoke for quite a while. I explained what stocks were again. We reviewed some companies she would recognise (Disney, McDonald’s, Snapchat, Apple). I showed her some revenue and stock price history charts. I think we got a bit lost in the details.

I was hoping she would get enthusiastic about a particular stock, but that didn’t happen. In the end I suggested that she create a separate sub account to accumulate some money that she might later use to invest. She did this and moved £50 into it:

I’m not really sure what the next step is with her. She’s at boarding school, so it’s a bit difficult to have these kinds of conversations over the phone. 

Maybe I should call her and suggest a few options (like a farming company, a food producer, or an energy company). Otherwise, perhaps a more open-ended approach is best: because she needs some diversification, perhaps I’ll ask her what’s the opposite of Roblox. Maybe that leads us to buying something like an outdoor clothing brand she likes?

It’s important that she feels that she’s making the decisions though. If I just tell her what to buy then she won’t really be very interested or invested in the process.
 

In conclusion

I’m keen to encourage my kids to develop the habit of investing. If they just keep their money in cash, inflation will slowly eat it. What exactly they buy is less important at this point. And if they own several different stocks across different sectors, they should be okay even if they happen to pick a dud or 2.

This is a work-in-progress for me. I’ll keep you up-to-date with how it goes. I would love to hear your thoughts and experiences. Hit reply and let me know.

How to open a brokerage account

I use Interactive Brokers. They are US-based, but they open accounts for residents of almost any country, and their fees are really low. They are a great choice for both US and non-US residents. The process is entirely online and they accept local bank transfers for many currencies. They also give you access to US stocks, which is where the companies your kids will recognize are listed.

If you open an account using my referral link, you could earn up to $1,000 in Interactive Brokers shares. I will also receive a referral fee.

But if you feel more comfortable with a different or local broker, that’s fine too. Just open an account. Even if you don’t own any stocks yourself. Do it for your kids.