It can be painful watching your young worker fritter away a summer's worth of lawn-mowing or baby-sitting income on video games, music downloads and frequent fill-ups of gas.
Might I suggest an alternative to summer spending? Invest the money in the stock market.
Terrible timing? Hardly.
Despite the stock market's choppy waters, socking away money in stocks when you're young is always a timely idea. It's a great way to beat inflation and build wealth. Besides, children have a long time to watch current losers turn into winners.
Today's investment choices are a far cry from when I worked summers as a grocery-store sacker. My only option seemed to be depositing my paycheck into a basic savings account that earned pennies on the dollar.
I wish I knew then what I know now.
As you consider investment options with your child's summer job money, watch out for fees that could eat away at returns and minimum investment requirements that may be too restrictive.
Start by putting your youngster's investing on automatic pilot by having a set amount withdrawn from his bank account or paycheck every payday. That way, for example, you could put away 10 percent each month for college, another chunk in a long-term investment plan, and leave plenty left over for spending.
One approach for small investors is a mutual fund with a low minimum investment. For example, the Monetta Young Investor Fund can be opened with a minimum deposit of $100 if you commit to investing at least $25 a month. The fund invests in kid-friendly stocks such as Disney, Apple and Google and offers educational materials geared to novice investors.
Also, Vanguard, Fidelity, T. Rowe Price and other large fund companies have choices suitable for small investors. Plus, they offer a heavy dose of online investment education tools.
Another way for beginners to invest small amounts in stocks is through ShareBuilder.com, an online brokerage firm. Choose from three low-cost pricing plans that allow you to buy shares for as little as $4 a week through automatic purchase plans in more than 7,000 companies, exchange-traded funds and mutual funds.
Similarly, MyStockDirect.com allows small investors to bypass brokers and buy from companies' direct stock purchase plans. Dividends are automatically reinvested.
Remember, young workers can contribute up to $5,000 annually in earned income in a Roth individual retirement account. Though contributions are taxable, the money can be withdrawn decades from now tax-free.
Finally, if you'll be shipping off a new high school graduate to college in a couple of months, an investment in a couple of hours' worth of time with a financial planner may have a longer shelf life than the latest video game or iTunes download.
Write to Steve Rosen at srosen@kcstar.com or at The Kansas City Star, 1729 Grand Blvd., Kansas City, MO 64108.
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