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At what age to start investing in the stock market?

Sunday, February 20, 2011

A blog post at Bully the Bear has generated much interest and discussion: The youth and the stock market.

Although I have some ideas of my own, I was feeling lazy and didn't want to comment but a cboxer, Evolution of the "lobster taller than small girl , ak's t shirt older than evo" fame, put me in the hot seat and asked "Ak , whats ur view on LP's new post".

I said that I have introduced my 9 year old niece to investing in the stock market. Yes, she is in primary 3 this year. She has some savings in the bank which is paid a paltry sum of interest. 0.2% per annum for young savers? Maybe it is more, I am not very sure but still paltry.

Anyway, she has some shares in SPH for more than a year now bought using my account and she has collected one year's worth of dividends. It is quite a lot of money for a 9 year old and she's happy with the dividends, needless to say.

Getting dividends from investing in SPH has demonstrated to my niece the power of delayed gratification. 

By not using her savings on things she wants to buy and by investing for income, she is able to use the passive income to buy the things she wants later on without touching her savings at all. 

I heard from my sister that my niece is very frugal these days and I heard from my mom that my niece would sometimes ask her what's the latest share price of SPH.

Sound ideas in personal finance and investment, I believe, should be taught to children as soon as they are able to understand them. Teaching them the importance of thrift and savings is but the first step. How to make their savings work harder? 

Now, that's a big second step.

I remember how I would save all my pocket money when I was a boy in order to buy the toys I wanted. 

If only I had someone to tell me I should save all my money and how to make my money work harder for me then.

Related posts:
1. Teaching young children financial literacy.
2. Little book that beats the market.


Createwealth8888 said...

So my kids started investing since one month old with their baby shower ang pow. LOL

AK71 said...

Hi CW,

Your kids didn't have a choice, just like Catholics being baptised soon after birth. ;p

I am sure you took pains to explain to your kids when they were older why you did what you did. Otherwise, they might resent you taking away their money. ;)

Createwealth8888 said...

Actually, the real investing started when one DIY with their own hard-earned money.

Anonymous said...

hi ak71,

can i invest for my kids when they are not even born and i dont even have a girlfriend to produce them?

is it being too far sighted?

AK71 said...

Hi CW,

You are right which is why I am getting my niece interested and explaining some ideas to her now. Hopefully, it would give her a headstart when she becomes a working adult. ;)

AK71 said...

Hi Anonymous,

Very droll. Good luck trying. ;)

Anonymous said...

Wow AK71,

Your niece is only nine years old and already have the knowledge shown by you how "money can make money". If she can really maintain her interest throughout her life, she will be a millionaire very much faster then you.
By the way WB started in running his own "business" by the age of 10-12. He also had some experience of investing in stocks around this age or slightly older. And his father was a stock broker. So he was not unfamiliar with stock investment.
So it looks like people who are genuinely interested in "business of money" at a very young age usually turn out to be millionaires in no time.
We have our own Singapore Gabriel YAP. He started in the "business of money" at a young age too.
Go and ask him how many millions he has now?
Ha! Ha!

Raelynn said...

wow CW, your children are lucky! my parents left my ang pow money (which i very obediently gave to them till i was about 10) in a POSB account instead of using them to buy shares for me despite having their own portfolio holdings.

AK71 said...

Hi Temperament,

Thank you for the very positive note. I can only hope for the very best. :)

AK71 said...

Hi Raelynn,

My dad, till today, still does not believe in the stock market. He has so many horror stories to share about people who lost all their money in the stock market.

I won't bemoan the fact that my parents did not invest my childhood savings for greater returns since they would only want the best for me and probably didn't want to risk it. Do I sound like I am consoling myself? Haha.. ;p

Musicwhiz said...

Hi AK71,

Good thing you did. I hope I can inculcate such values in my daughter in future as well.

Thanks for this post.


AK71 said...

Hi MW,

I am sure your daughter would have a very early headstart. MW's daughter. Life father, like daughter, right? :)

Anonymous said...

Envy all these kids for having such good advisor.

All I had was those scheming insurance agents telling me that Endowment are good form of savings and that you put a little and get back a few times back when it matures. Plus insurance coverage too. Or that bank sales person saying that unit trust are also good form of investment as you can share into a bigger pool of funds to touch the stock market......

Envy envy

Now, at 40, i have to undo those years of bad investment advise and get back into shape.

Still I have to thank you AK for blogging. it really helps.


Journalist said...

2 sides of a coin really, I think for parents/uncles to invest for their kids/nieces are good (provided you are 100% the money will grow).

My mum invested the sum she and dad set aside for me in stocks and 75% of it got wiped out. You can say she's a bad investor but her intentions were similar to yours.

When I'm 18, she told me to buy insurance, again thinking it's what I needed, and when I'm 21, I regretted it.

I believe the right age to start investing in the stock market is when you yourself learn about it. Having someone else investing on your behalf, just isn't the same.

AK71 said...

Hi SnOOpy168,

To be fair, not all insurance products are duds. Really. We just have to carefully go through the details and decide for ourselves instead of relying on advisers.

Personally, over the years I found a couple of good endowment policies which were low risk and had relatively high returns. They are no longer being offered, sadly.

Doing our own investing comes with its own set of challenges which I am sure you know. Know what we want and find the right path is crucial. Of course, if we have guides, it would help, and I am glad you have found my blog helpful. :)

AK71 said...

Hi Journalist,

I am sure our parents would have our interests at heart in all that they do. However, what they think is best for us might not really be the case. So, it is true that we should do it ourselves and make sure we are educated to do it right! :)

yyt said...

Hi AK,

"delayed gratification" is a very powerful and yet intricate concept.
Some people get it quick, others need "cajoling" via dis-incentives, some needs just a little guidance.

Glad that your niece sees the point in it + your guidance.

Coincidentally, I was reading a book mentioning this concept amongst American kids. It's called the Standford Marshmallow test.

Maybe you can device an experiment for your niece too. LOL.
Substituting the marshmallow with something more relevant to her age, like erm, I dunno, McNuggets?
haha. :P
I tend to believe people are more primal when it comes to food, haha regardless of their age.
If we are able to control this instinct, there seem to be little that we cannot do.


left_ray said...

It's so very important to teach our kids in financial planning and investment is just part of it. The top priority should be risk assessment.

Jay Chia said...

Hey AK !!!

What you are doing to your niece is what my dad did to me last time when I am at that age !!

Well done !

AK71 said...

Hi yyt,

I was a really frugal person and, in many ways, I still am. To be exact, it started from the time I became a working adult. Money is so hard to make, isn't it?

Many things I wanted to buy, I didn't. Now, I am able to buy so many things without really having to worry about touching my savings.

That Marshmallow Test is interesting. I will explore it further. Thanks! :)

AK71 said...

Hi left_ray,

Yes, that is an important concept too. All in good time. I don't want to intiminate a 9 year old girl so much that she avoids any topic on investment in future. ;p

AK71 said...

Hi Jay,

Hey, nice of you to drop in. Thanks for the encouragement. :)

Harry said...

Hi AK, with regards to your comment dated February 21, 2011 10:13 PM, I would like to add that humans when faced with the paradox of choices will tend to lean towards more comfortable options instead of choosing the best ones. I guess when given so many choices to manage your money/savings our parents will just choose one that is easier to handle.

I would like to share this youtube video, it explains the human behaviour when given choices

AK71 said...

Hi Harry,

People have their comfort zones. It is quite true. Thanks for sharing the link. :)

AK71 said...

Hi Capricon,

Thanks for letting me know.

The blog post is available now. :)

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