TEACHING children about money with a simple piggy bank or savings account may be outdated, some financial institutions say. Instead, introduce kids to investing - the younger, the better.
The future is expensive: For a ninth grader, the cost of a four-year public university will be between $31,000 and $42,000. For a private university, it will be as high as $78,000 to $107,000. Count on up to $371,000 for a 1-year-old child's future private college education.
A recent study conducted by Harris/Scholastic Research for Liberty Financial in Boston finds that 89 percent of high school students plan to attend college. But 36 percent report that their parents are not saving money for their educations.
``Talking about money needs to start at about 3 or 4 years old,'' says William Rice of Liberty Financial, who with colleague Porter Morgan developed a ``Young Investor Program.''
The program is aimed at parents, who ``set the tone'' for learning about money, Mr. Rice says. A 50-page guide explains how to discuss financial issues with children, how to plan for a college education, and how to teach children to invest.
Liberty Financial advises showing children how credit works by charging them interest on allowance advances. A chapter on investment choices suggests letting them invest an imaginary $100,000 for a month and track its progress.
The program also advocates using real money to diversify a child's investments in stocks, bonds, or mutual funds, and involving the child in the decisionmaking process.
Several institutions, like Monetta in Wheaton, Ill., and Charter Capital Blue Chip Growth in Milwaukee, offer low mutual fund account minimums. Liberty Financial, for its custodial accounts (aimed at investors who are minors), requires only $50 to open a mutual fund account.
The National Association of Investors Corp. (NAIC) in Royal Oak, Mich., has a low-cost investment plan: A custodial account can be opened with the purchase of one share of stock (about $20 and up) and a $10 additional investment, says Thomas O'Hara, chairman of NAIC's board of trustees. Grandparents and parents tend to add to the account, but children obviously do have input: ``McDonald's is a very popular company,'' Mr. O'Hara adds.
Although the number of Liberty Financial's custodial accounts has steadily increased, ``we don't expect [this policy] to increase business,'' Rice says, adding that it is costly for the company to maintain many accounts with small balances.
But it is a savvy marketing strategy.
Banks and investment companies are marketing their services to younger groups, says Robert Johnson, chairman of the American Bankers Association's trust and investment management division. ``They see them as a market they want to attract at an early age.''
Children comfortable with financial issues, who understand the value of investment, ``make better customers'' in adulthood, Mr. Johnson says. Promoting small initial investments ``is a wise move on the mutual fund companies' part.''
Banks have long reached out to young people through school presentations by offering materials such as the ABA's Personal Economic Program and ``Meet the Bank'' comic book.
Nearly all banks offer no-fee, no-minimum-balance savings accounts for kids, but ``most banks don't have a lot of special products for children'' beyond savings accounts, says Patricia Boerger of the ABA in Washington.
Not everyone agrees that children should be introduced to financial issues. ``I think that's an awful lot [of responsibility] to put on a kid,'' says Richard Wojcik, a financial adviser with New England Financial Planning Group in Burlington, Mass. ``I think kids need a childhood.''
But the learning process can be gradual, Rice says. He suggests stressing simple concepts such as a savings goal. ``Things like `turn off the lights' become more concrete,'' when children have an understanding of money issues, he adds.