Do Your Kids Invest? Help Them Build Wealth Now with DRIPs

Help your kids invest in DRIPs (or anything else) and they will be off to a better financial future. Plus, read on for a special code to enroll in a direct investment plan for 50 percent off.

Not too long ago, my accountant and I had a conversation about my business, and what I could do to find another deduction, while helping my son at the same time. He pointed out that I can pay my son a “reasonable” hourly rate to do office assistant type stuff around my home business. I don't have to worry about payroll taxes, and my son probably won't make enough for the kiddie tax to be a problem. I get a deduction, and my son gets some extra cash.

But what should he do with that extra cash? I don't think he should just spend it all. And it's a bit more than the whole allowance thing, which my husband and I use more as a teaching tool to encourage 10 percent tithing and 20 percent long-term savings. I talked to my son about it, and we agreed that, after paying 10 percent in tithing, half of his income from working for my home business should be invested.

Invest in DRIPs

That, of course, begs the question: What should it be invested?in?

Vita Nelson, the co-manager of the MP63 Fund (ticker: DRIPX), which is highly rated by Morningstar, thinks that an ideal way for you to help your kids invest is through DRIPs.

“At my age, we have Social Security benefits, but now there's talk about what will happen in the future,” Nelson says. “It's smart to be responsible for yourself and to start planning for it now. You can help your kids see that, and help them start building wealth now.”

Help Your Kids Invest Now for Wealth Later

Nelson likes DRIPs for an obvious reason: It allows you to automatically buy more shares with your dividend income, beefing up your portfolio over time. I'm a big fan of DRIPs myself, and have some of my portfolio in funds that automatically reinvest dividends.

Nelson, of course, encourages others to use DRIPX. “Even with fees, we still beat the big guys, and we are still doing so. It's a great way for the small investor to get started.” She also has a site, DirectInvesting.com, that helps investors enroll directly in company DRIP plans.

However, it's really about the dividends, the reinvestment, and getting your child excited about investing, and Nelson knows how to do this. “I didn't get my own children interested in investing, but I have been successful at getting my grandchildren investing in DRIPs.” If you want to help your kids invest for the future, Nelson offers the following tips:

help kids invest in DRIPs

  1. Start young: “I tried to get my own kids interested when they were young adults, and it didn't really work,” says Nelson. “Start younger, and they will be interested, and develop better habits.”
  2. Do it in their name: It's possible to set up the account so your kids can see the results. I know that my son loves watching his long-term savings account balance grow. With investing, that pleasure should be multiplied. “Your kids should get reports, statements, and more. It will help them be interested. Even if you invest $25 at a time, it is fun for them to see it add up,” says Nelson.
  3. Buy companies they know and recognize: This is a good way for kids to be interested. Ask them about brands and toys they like, and see if you can find DRIPs with those recognizable — and cool — names. It will keep their attention.
  4. Talk to them about their investments: “Ask them about their statements,” suggests Nelson. “Talk to them about their dividends, and their portfolio growth.” When you take an interest, they will, too. And it's encouraging for them.
  5. Get them used to the ups and downs of the market: One of the benefits of starting young and using investments like DRIPs is that it helps kids learn how to avoid panic. “It stops them from being nervous about their investments,” says Nelson. “They learn the benefits of dollar-cost averaging and how to avoid reacting emotionally. Too many people follow the market like lemmings, and you can keep your kids from going off a cliff.”

Nelson's site, DirectInvesting.com, makes it easy to help you find great DRIPs to help your kids invest. There is a great DRIP stock starter portfolio with good ideas, as well as a handy calculator that can help you see what your investment now can yield on behalf of your child.

If you want your kids to invest for wealth later, it's never too early to start. What's more, you can start investing with as little as $25. Keep your child's DRIPs in a Roth IRA, and you're doing them an even bigger favor. That's what I plan to do with my own son's custodial account. Open a custodial IRA, and buy DRIPs, and your child will have an even better start to wealth.

How to Enroll at the Member Price Without a Membership

If you are interested in enrolling with a DRIP, and you go through DirectInvesting.com, you can get 50 percent off the non-member price. You can enroll in a full-year membership for $100, and get access to a number of premium features, and pay $30 for each enrollment. (Once you pay the enrollment fee, you are part of the chosen company's direct investment plan, and work with the company and its DRIP program. This represents you buying directly from the company, rather than buying second-hand, as you do when you buy on a stock exchange.)

However, you don't have to enroll as a member to get the membership price. Enroll using code MOM, and you will get the $30 price, without buying a membership. This applies to multiple enrollments, and is in effect until DirectInvesting.com decides to end the program.

Invest in DRIPs

1 thought on “Do Your Kids Invest? Help Them Build Wealth Now with DRIPs”

  1. Great article! I’m a huge fan of DRIPs/DSPPs even in the discount broker era we live in. It is still the cheapest and best way to dollar-cost average with small amounts of money over the long term. Perfect for children who have many years before needing the money.

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