Although I’m not a parent, I sympathize with the arduous task parents have teaching their children about money. Even simple concepts like saving and budgeting are foreign to kids, since they don’t really have an income or expenses. It’s easy to never run out of money when all your needs and most of your wants are covered.
Still, it’s important for kids to learn at least the financial basics. Schools are starting to recognize this, and curriculums are starting to embrace that change. Children are starting to learn about finance in school, with topics such as budgeting, compound interest, and introducing the concept of income taxes. While this is a good start, there remain a lot of gaps in financial education for young people.
One of those voids is investing. The good news is parents can start to fill in that gap even while their kids are young, by using certain kid-friendly companies to get their kin interested in investing. We all like to invest in companies we use everyday. Why wouldn’t kids?
Here are three companies that cater to kids, and have simple businesses that children can understand.
Corus Entertainment (TSX: CJR.B) is a big player in Canadian media, even though it doesn’t get a lot of attention. It owns 22 speciality and conventional television brands and 37 radio stations, as well as a growing content creation business. It currently trades at a trailing P/E ratio of less than nine times and sports a dividend yield of more than 4%.
Kids will like this company because it is Canada’s leader in children’s television programming. It owns YTV, Treehouse, Teletoon, and Teletoon Retro, all stations that cater to kids. The content creation business also focuses on creating new kid-friendly shows, and then reselling that content to other networks around the world.
It’s an easy business to explain to kids, since there aren’t a whole lot of moving parts. Advertisers pay so their products are exposed during commercials.
As the largest manufacturer of both baby seats and bicycles in Canada, Dorel Industries (TSX: DII.B) is committed to both the safety and entertainment of children. It also has a home furnishings division, trades at 19 times trailing earnings, and has a dividend of 3.5%.
As your child unwraps a brand new Dorel bike on Christmas or their birthday, seize the opportunity to explain to them the basics of supply, demand, and how manufacturing works. In theory, the business of selling bikes is simple. Customers are willing to pay a premium for a finished bike. So the company finds all the parts needed and builds it, and the difference between the cost and the selling price is its profit.
This may be all lost on a kid who wants nothing but to ride that new bike, but it’s worth a try.
Even after more than 60 years in business, McDonald’s (NYSE: MCD) is still the master of selling meals to kids.
Thanks to its partnership with Disney (NYSE: DIS) — another great stock for kids — McDonald’s features Happy Meal toys from every new movie kids want to see. Both companies are masters at marketing to kids, and both companies also know that once they’ve won over the kids, the parents will usually get dragged along and buy their own ticket to the movie or McDonald’s meal.
The next time you and your child are enjoying a meal at McDonald’s, take the time to explain the very basics of the restaurant business to them. It just might interest your child enough to begin a lifelong obsession with investing.
Foolish bottom line
To successfully teach children about investing, they must be engaged. The easiest way to do that is through companies that sell products and services they know and love. If parents are serious about teaching their children the basics of investing, they set those kids up for a lifetime of financial stability. That’s one of the greatest gifts a parent could ever give.
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