Mary and her husband set out to build a stock portfolio worth $25,000 as a college graduation present for each of their children. That’s a lofty goal. How did they do it? In her entry to the GRS video contest, Mary explained:

Here’s how Mary describes her method in a post at her site, Frugal to Rich:

When our children were born and people wanted to get a gift for the baby, we asked family and friends to give us the gift of money that we would invest for them. We felt this was a much wiser choice than some new toy that would soon be worn out or in which they would lose interest.

We set up a very low cost stock index mutual fund (such as VFINX), along with a general stock mutual fund for each child and started investing.

When the children were old enough to start working, we wanted to really encourage their frugal living and investing, so we made them an offer they could not refuse: For every dollar they contributed to their savings, we would match it — so they would double the amount of money they had to invest!

When Mary’s kids graduated from college (debt-free!), she and her husband transferred portfolio ownership.

I think this is a fantastic idea. It’s a great way to teach children about frugality, investing, priorities, and more. Do you know anyone who’s done this with their children? What other effective ways have you seen to teach kids about saving and investing?

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