| Answer: Dear Bruce:
I'm so pleased you asked this question because teaching kids how to handle money is one of our most important responsibilities -- and one that many schools, unfortunately, do not tackle. Yours is a wonderful exception. And clubs make learning about investing a great deal of fun.
But, you're absolute right -- minors cannot own stocks or bonds on their own. That in turn means, by themselves, they can't be members of a "real" investment club. However, I'm happy to report, there are several ways around this dilemma.
(1) INVOLVE THE PARENTS.
You could set up a real investment club, e.g., a partnership, with the parents serving as custodians for their kid's account. In other words, for each student in the club, a parent or guardian signs the partnership agreement as "custodian for" that minor. (This also requires a Social Security number for each child.) The students can (and should) do all the research, make presentations to the group and decide which stocks to buy.
NOTE: You'll find more details about custodial accounts in two places right here on the BUYandHOLD site: In Under the Oak, there's a Q&A about buying stock for a godson and in our Family Investing section, an article entitled, "Setting Up a Child's Account."
Under this custodial arrangement, the club's securities would be held in the name of the investment club and a designated adult would handle the brokerage account trades.
We can easily set this up for you here at BUYandHOLD -- we have over 3,000 investment clubs with a special division handling them.
At BUYandHOLD, accounts can be arranged so that each member can view the club's portfolio online at any time, but only the designated adult can actually make the investments. This also provides you with an opportunity to teach the kids how to use the Internet to track stocks, read current news about the companies they've invested in and generally develop a sense of confidence about money issues.
(2) A TRAVELING CLUB
A second possibility is that you could form what's known as a "traveling investment club." Here the group forms an informal club -- not an official, formal partnership -- and the individual members then purchase stocks in their own names, not the club's name. Again, of course, each minor would need to have a parent or guardian make the purchases for them as "custodian for" the minor. This type of club is described in detail, along with other student clubs on the National Association of Investors Corp.'s website:
http://www.better-investing.org/. Click on "Youth." (NAIC is an umbrella organization for investment clubs.)
(3) A PAPER CLUB
You could form a club and invest "on paper" using pretend dollars.
Although Option #3 is my least favorite -- because it's just not as exciting -- I mention it in case the other two suggestions don't work out.
Bruce, if you have any additional questions, simply call BUYandHOLD's Customer Service Department at 1(800) 646-8212.
GOOD LUCK! And, let us know what name you and the students pick for your club. |
