I shared earlier that we opened Vanguard accounts for our three kids in December 2023. They'd accumulated enough in their savings (a combination of saving half their earnings plus some earmarked "college money" gifted to them from Nana & Papa) to meet the $3,000 minimum opening balances. They were officially tweens and teens in the stock market.
Side Note: We require our kids to save 50% of every dollar they earn, from allowance to side hustles to working in the family business. There are many reasons for this - read more here.
Since opening each account, we auto-invest each week, dollar cost averaging their weekly $10 of allowance savings plus whatever else they'd recently earned. With my older daughter's pet care business, her savings and long-term investments were adding up. At fifteen, she is fully internalizing what passive income is, looking at how her balance has grown.
2024 was a good year. Good old VTSAX (the Vanguard total stock market index - because boring is beautiful) gave the kids' accounts a rate of return of 22.8% as of 12/31/2024.
It won't always be this good. We remind ourselves regularly that the stock market goes up - and the stock market comes down. However, if the past 110 years or so are a reasonable indication, it will continue to increase over the long term.
Baby Girl was intrigued. Investing her savings account in the stock market wasn't enough. She wanted more. She wanted to invest some of her spending money. This one plays the long game.
Before sending her spending funds to Vanguard, we spoke many times. She needs to understand that while she is free to withdraw the spending part of her investments anytime she wants (the savings portion is out of her reach until she graduates high school and leaves home), its value will fluctuate. When she wants to spend that money, it may come back to her with friends, or it may be missing a piece.
Pointing to the three dips in her account performance chart, I asked, "Would you be mad if I told you in April you'd lost $332, in October you'd lost $77, and in December you'd lost $364?" She hesitated, replying, "Well, I'd be sad ..." I smiled. This is why we don't stare at daily and weekly fluctuations, but look at it longer term or not at all.
She was convinced. She has more in her spending account than she has interest in spending. While I want her to enjoy the fruits of her labor, I also honor her interest in wanting to compound her money until she has something she truly wants to spend it on. She'd thought about it a long time, and made her decision.
I explained dollar cost averaging and she chose a time horizon to move her funds into the market. Now we are moving $1500 from her spending account into her brokerage account over the 9 weeks of January and February. Let's hope the market continues to shine.
How are your kids involved in the stock market?
Not sure how to introduce money concepts to your children? Check out this online course: Raising Wealthy Kids
Stephanie Brooke Lennon is the author of Family Bank Blueprint, GoldQuest, and What Would Water Do? Simple Strategies for Navigating Life's Obstacles. Her titles are available in Paperback and Kindle on Amazon.com. Follow Stephanie Brooke on Facebook, Instagram, TikTok, YouTube, Twitter, Amazon, and at BrookeLennon.com.
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