Half-birthday investment gift
My baby girl had her first half-birthday yesterday. It is crazy to think that it has been 6 months already since my first “holy cow I’m a dad” moment.
Anyways, my wife and I have a lot of goals for how to raise our daughter. We want her to have the resources to go to college, start a business, buy a car, go on a mission, or do whatever she wants when she leaves the nest in many many years. We also want her to be excited about investing, to understand how it works, and to see the benefits of it.
So tonight, after a few months of pondering, we settled on a plan: for Anna’s half-birthday each year, we’ll invest $250 into GE for her (keeping it in our name until she is old enough to really understand it).
Why GE? It pays dividends every quarter. She’ll get to see returns from the investment several times a year, even if the stock prices are down. We’ll reinvest the dividends, so she’ll also get to see her number of shares going up each quarter, even when it isn’t her half-birthday yet. GE is also very stable and diversified, so the likelihood of it disappearing is slim. It also tends to be cheap enough per share that we can get a decent number of shares.
There are a few cons to going with GE. Its performance hasn’t been phenomenal over the past decade. There are definitely stocks that have done better (and many that have done worse). It also isn’t a very exciting stock. A kid today would be much more excited about owning some Apple stock than they would about GE.
Why not a mutual fund? Well the goal is to teach Anna about stocks, investing, and to get her excited about it. It is hard to see why a mutual fund’s price has gone up or down. With an individual stock, like GE, we can look at the news or read press releases to find out why the price has changed. We can also talk about how the policies and decisions of our elected leaders can affect the price. I imagine her coming to me and being like “oh my gosh dad the GE earnings report is out!”, and then we’ll sit down together and look over it. (A father can dream…)
We plan on investing $250 each year and, unless she has a dang good reason, we won’t let her take it out until her 18th birthday. This means we’ll invest $4,500 for her over the next 18 years. If my parents had done this for me, then I would have had about $22,000 on my 18th birthday (and that isn’t even counting dividend reinvestments). Of course $250 was worth a lot more back then, and past performance doesn’t guarantee future performance, but I still think Anna will have a very healthy chunk of cash waiting for her.
Of course, I’m not sure how we’ll afford this once we get up to 8 or 9 kids…