I can think of two main benefits from helping your children save and invest. They learn where money comes from and where it goes and grows.
They can also learn about finance on a very easy level to demystify the process. There are still even adults who don't know a lot about, much less understand, share investing. Kids may not have long attention spans, but using simple investing and saving goals can work for them. Appeal to their desire to have something bigger tomorrow. That will teach them patience, consideration and planning for their own future.
Putting together the start of a portfolio for them
Since they are young and have many years of investing ahead, a portfolio could lean more towards growth. They can take some more chances than much older investors because they still have time to make up for some mistakes, which can be lessons in themselves for them.
I think a good start would be with the three following stocks. They have good growth profiles, are financially sound and are known by the kids themselves.
— Domino's Pizza Enterprises Ltd (ASX: DMP)
What kid wouldn't want to be part-owner of their own pizza place? The market research is easy and tasty. It has a strong growth history and is expanding into Japan and some European countries like France.
Analyst consensus forecasts are looking towards earnings to grow by over a compound 20% annually for the next two years. The drawback is the high 38 price/earnings ratio- everyone expects it to grow strongly and have bid it up. For the portfolio, maybe just a small opening position so the children can watch and learn at least.
— Flight Centre Travel Group Ltd (ASX: FLT)
This is a brand they may know from trips to the shopping mall and they can understand what the business does. The travel agency is still growing its store network domestically and has been very active in big travel markets like the US and Europe. Its corporate travel business FCm Travel Solutions also has grown well.
Analyst consensus forecasts are for earnings to grow around a compound average 9.5% over the next two years and it currently offers a 3.1% dividend yield fully franked.
— SEEK Limited (ASX: SEK)
Maybe an older brother or sister (or even Mum and Dad) has recently been job hunting, so they may have visited the number one job search website Seek.com.au. Though it's an internet stock, young kids these days are getting web-savvy with their own tablet PCs and mobile phones, so they are used to it.
Seek has grown its earnings per share by over five times since listing in 2005. It plans to maintain its market-leading status, as well as expand into Asia, where larger job markets are developing in growing economies like China and Malaysia. It has a relatively high 30 price/earnings ratio, yet the growth potential could possibly justify it.
