Financial companies create plans to educate children

Mutual funds

December 22, 1996|By Jerry Morgan | Jerry Morgan,NEWSDAY

Educating adults about the need to save and invest for retirement seems to be a major goal of financial companies in dealing with their baby-boomer customers.

But it's relatively recently that much attention is being paid to educating children about money and investing so that, unlike their parents, they won't have to learn too little, too late.

Now two financial companies, for reasons both altruistic and commercial, have created programs to do just that.

The first one, which has been quietly running without fanfare since 1994 but which just opened its new interactive Web site, is Liberty Financial's Young Investor program.

That is tied to the Young Investor Fund, a no-load growth fund set up especially for the program and managed by Stein Roe of Chicago, one of Liberty's companies.

The other is the Kids, Parents and Money program run by American Express Financial advisers, which started in September and whose investment vehicle is the $10 billion-plus New Dimensions fund, the flagship fund of IDS of Minneapolis, an American Express company.

"Even before we had the fund, we started this as a corporate-visibility project because everyone was paying attention to the retirement dollars," said Bill Rice, director for the Young Investor Program and head of corporate communications for Liberty Financial. When the fund was opened in April 1994, "my kids had the first three accounts," Rice said. His fourth child, born later, also has an account.

The Young Investor Fund includes as part of its mission investing in companies that kids understand. And it has provided returns an adult can appreciate. Since inception, it has gained about 32 percent on an average annualized basis.

For the 12 months ended Dec. 5, the fund is up more than 36 percent, according to Lipper Analytical Services Inc. It has more than $260 million in assets, said co-manager David Brady.

The American Express program invests in the huge New Dimensions fund instead of creating a new kids' fund. New Dimensions is up about 26 percent for the past 12 months.

"The research we did showed that the baby-boom parents didn't want to be second-guessing the performance of a new fund. They wanted to be sure the performance was there," said Jane Lee, director of Kids, Parents and Money. "But New Dimensions has stocks that kids respond to, like Mattel and McDonald's."

Lee wouldn't give any numbers for assets under management in the new program, but added, "We met our year-end goals in the first six weeks."

Both funds reduce the minimum required investment if money is invested for children under the Uniform Gifts (or Transfers) to Minors Act. American Express drops it from $2,000 to $500; Young Investors, from $2,500 to $1,000.

Both programs aim to be child-friendly and offer coloring books, games and information in colorful and easy-to-read forms. Young Investors also asked children which companies they would like the fund to invest in, with both expected and interesting results.

Most named companies such as Nike, Mattel, McDonald's, Disney and Coca-Cola, all of which were already in the fund. "Two-thirds of the names in the portfolio are stocks that kids can relate to," he said. One of the names not in the fund is Fila, a popular sportswear company that a couple of children suggested investing in when the stock was at 27.

"We looked at it and compared it with Nike, which had more of a track record and which we had a better handle on," Brady said. "More in hindsight, we should have bought Fila at the time, since it hit a high of $107, but we bought more Nike."

Both the American Express Kids, Parents and Money program and Stein Roe's Young Investor program try to engage and educate, using games that start simply: five pennies equal a nickel, two nickels equal a dime, etc.

Among the tips in the American Express packet, Lee said, is having parents give the children the grocery shopping list and getting them to match grocery coupons to the list. The more they can match, the more money saved. The savings is then split with the children.

There is also an American Express book called "Kate and Kenny's Marvelous Money Adventure," about two children whose grandmother gives each one $250 and promises more to the one who makes the most money in three years. The book is their trip into learning about investing.

The Young Investor Web site, which is running but still being built, uses different guides, from Lisa, an environmentalist who likes double cheeseburgers and socially responsible investing, to Blad, who likes Metallica and technology stocks.

Children have to log on with their age. For those under 13, the writing is simpler and definitions and games easier, Rice said. A financial quiz game can be downloaded. The site is http: //www.younginvestor.com. The American Express site can be reached at http: //www.americanexpress.com/advisers, then clicking on the Hot Topics on the home page to get to the Kids, Parents and Money site.

Parents who want to get the free Young Investor parents guide, a 50-page book, a game diskette and information about signing up, including a prospectus, can call (800) 403-KIDS. Those who want American Express' free college-planning guide can call (800) 986-9598. You have to go through an American Express financial adviser to join the Kids, Parents and Money program, since these are broker-sold funds that charge a commission, or load.

This, of course, is the reality of the programs: These are mutual funds, and while the desire to educate children about money is sincere, it is also a marketing device to give you a reason to buy a fund.

As Stein Roe's Brady said, the fund has two goals: to educate children and to get superior total returns. "My kids are in it," Brady said, "but so are my parents."

Pub Date: 12/22/96

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