Last night my teenage daughter laid out her plans for the next two years, objectives which included school applications, alternatives to rejections of those applications, and her perspectives on these choices. I applauded her enthusiasm and I praised her foresight, but I didn't remind her that she omitted financial planning because I didn't want to spoil her illusion of complete control. We all need those moments in life, after all.

But, I do intend to have that financial discussion with her, and I hoped that I could frame that talk in such a way that would allow her to continue to feel that she holds the reins on her future. Then I remembered that she wasn't in control because the money that she's saved to date originated from her parents' wallets, not from any job that she held. Still, I feel the need to help her make that transition from total dependency to financial responsibility, and I want to make those lessons stick with her throughout her high school and college years.

I could withhold some money each month to make those deposits in her portfolio for her, but my interference wouldn't teach her how to save that money or how to make her own choices. Instead, I made a list of some stock market sectors that are also listed at BUYandHOLD to teach her more about investment diversity. Then, I included ways within those sectors where she could save $30 per month, an amount that is easy to remember and that will more than cover the costs of a monthly investment purchase at BUYandHOLD (more about this in a moment?). Here's how it works:

1. Food and Beverage: A look at the top ten holdings in the food and beverage sector at BUYandHOLD shows that Cora partakes in the absorption of products from at least five of these companies. If Cora could control her urge for a caramel-flavored coffee drink topped with whipped cream at least two weeks out of the month (this is a weekly treat for her), she could save about $10 per month and shave almost 800 empty calories off her dietary intake (see last week's article).
   
   
2. Telecommunications: Cora still lives at home, so her parents take care of the telecommunications bills. However, if she spent less time on the cell phone with her friends and more time on her studies, she might save $5 per month on the phone bill.
   
   
3. Recreation and Leisure: Yes, movies provide a great escape from parents, but they also cost more than a DVD rental. If Cora eliminated two movies per month and stayed at home to watch a movie instead, she could save $5.
   
   
4. Consumer Goods: Cora's consumer goods come mostly from her family, but she's been known to ask for money instead of gifts so that she can purchase items that she wants rather than pretend to enjoy items offered by well-meaning relatives. However, if she took a small percentage of that money given to her during holidays and set aside one dollar a week from any allowance monies, she could easily save $5 per month or $60 per year for investments.
   
   
5. Transportation: It would be odd to even consider that Cora should pay for gas when she uses the car to run errands for her family. But, if Cora could figure out how to consolidate trips (stop by the grocery store on the way home from school instead of making two separate trips), then she could be rewarded for her efforts. Considering that a gallon of gas hovers around $2.50 these days, it wouldn't take a rocket scientist to figure that two gallons saved equals about $5 per month for investments. Two gallons would equal approximately ten miles per week, dependent upon the make and model of automobile.

In sum, the amount saved above equals $30 ($10 for the coffees and $5 each for the other four sectors). Although BUYandHOLD lists several other sectors plus other options for diversity like closed-end bond funds and index shares, I wanted to include just five sectors that Cora could relate to in her daily life. And, while I listed five sectors, it would be appropriate for her to pick just two stocks - one from each sector - to concentrate on in her stock market portfolio. Why? Because anything more than two stocks could be too much work for most teens. Plus, two stocks are enough to avoid the dilutions of a $30 per month investment plan.

For instance, if Cora picked two companies within two different sectors for a Basic Investing Plan portfolio at BUYandHOLD, her cost for that plan currently would be $6.99 per month. This cost is minimal, considering that she would receive two buy or sell trades for that price. Based on this plan, she could alternately invest $20 into each company every other month ($30 - $6.99 = $23 rounded off, $20 of which would go into each purchase, the minimum investment for purchases).

If she stuck to this plan, her parents could offer the balance each month for her investment into both companies each month. This plan would allow her a further benefit from BUYandHOLD for busy teens, where she could add these two stocks to the E-ZVest^sm plan. With this plan, she could determine the exact dollar amount she wished to invest as well as the frequency of her investments.

Of course, Cora would need to be older than 16 years-of-age to open her own portfolio (see the age requirements listed at BUYandHOLD), but that doesn't mean that she can't learn the importance of researching investment ideas before making any investment. Working together she will become responsible and confident in handling her investment portfolio when she attains the age of majority. If we waited until she was old enough to make these decisions herself, she would lose out on several years worth of savings and investment lessons while still at home. Who knows? She may find more ways to save $5 here and there so that she'll have a nice little nest egg by the time she feels compelled to make more plans for her future. That's one way for her to really gain control over her life, because there's nothing like a little financial freedom to be creative.

Until Next Week,
Linda Goin