What I Learned From a Family Investing Competition

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last updated 20 June 2023

If only I had understood how important it is to start investing early. My parents came from modest backgrounds and so, when raising their kids, didn’t have much money to invest, let alone investing knowledge to share. By the time I had learned and earned enough to start investing, I wanted to make sure the next generation of my family didn’t make my mistake and miss out on those important early investment years.

But how could a bunch of nieces and nephews of different ages and cultures spread out around the world get inspired to learn about investing? You can’t count on schools. True, some schools have investing clubs or require personal finance classes. But most don’t. Only 17 states require any kind of personal finance education, according to Next Gen Personal Finance, a nonprofit dedicated to improving personal finance knowledge. And even in the best school programs, investing typically takes up only about two weeks of a standard 18-week-semester personal finance course, several personal finance teachers told me.

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So, in December of 2014, I launched an informal family investing contest. I couldn’t find many good how-to resources, so I just winged it. I opened a dedicated account at an online brokerage with $400. I offered the three oldest members of the next generation — at that time ages 11 to 13 — a holiday present of $100 each in any stock they wanted. I set aside $100 for myself so they could have the fun of besting me. I hounded each of them until they chose an investment.

From that reluctant start, it has turned out to be so much fun that cousins, uncles and other family members have joined. I now send out regular e-mail updates to the players, naming the winners and losers for both the most recent quarter and since they joined the contest, slipping in little lessons along with the results. There are now 10 members in the group, ranging in age from 12 to 79, spread across four different states and Scandinavia.

My nephew Elias, 21, who has dominated the contest because of the strength of his investments in the computer game companies he enjoys (Activision and Sony), says he and his high school and Army buddies sometimes play simulated day-trading games, tracking real stocks, on their smartphones. But, he says, “our contest is more fun because it is real.” And he says it has gotten him so interested in business and economics that he plans to major in those fields when he enters college this fall.

I opened a taxable brokerage account for simplicity’s sake, and I am on the hook for any taxes due. But our holdings are so small, and we do so little trading (because I emphasize buying and holding), that the annual tax bill is low. This winter I received a Form 1099 for $42 in dividends, for example, which added about $9 to my federal tax bill. Larger accounts might necessitate a consultation with a tax expert and perhaps a different setup.

The $100-per-person holiday gifts that I used to seed the accounts were admittedly a bit more valuable back in 2014. But even in these inflationary times, $100 is still enough to pique the interest of youngsters. Says 17-year-old cousin Katie: “A hundred dollars is enough. More money might be too scary. Plus, it makes it easy to see who’s ahead.” Besides, she adds, “the whole point is about the bragging rights.” Katie’s three-year-old investment in the iShares Biotechnology fund at first gave her plenty of bragging rights. But lately she has dropped near the bottom of our rankings.

There is a downside to putting too much money at stake, says Joel Aslanian, a Seattle-based real estate developer whose father-in-law started an investing contest with much higher stakes for his children many years ago. Aslanian watched as the competition sometimes created hard feelings. So when his kids came along, Aslanian wanted to lower the stakes. “I do think it is important for engagement that it involve real money, not a make-believe portfolio,” he says. “I really struggled with the amount of money to start. I didn’t want this to be about wealth transfer. But I wanted it to be enough money to mean something when it went up and down.” He settled on adding a high-three-figure sum every December. “The amount of money involved is really secondary to finding a way to get the kids involved,” he says.

My nephew Hunter, 21, loved eating at Cracker Barrel Old Country Store when he was younger (he especially liked the dumplings), so he chose that stock to start the contest. For the next several years, it kept him near the top of the rankings, rising in price and paying a good dividend that was reinvested, compounding his gains. Then COVID hit, and he wanted to sell. It had been such a great performer that I talked him out of it, figuring the stock would bounce back when the pandemic eased. Big mistake. The stock has languished since then.

To make up for not listening to him, I gave him another stock. He chose Ford Motor in December 2020, which spiked up for about a year. He then sold to pocket a profit of 126%. Humbled, I agreed to sell his Cracker Barrel shares recently so he could invest in a stock he thought would benefit from the artificial intelligence boom: chip maker Nvidia. He still loves Cracker Barrel dumplings, but “it was time to move on, Aunt Kim,” he says.

This experience taught me it’s important to trust the young folks’ judgement. What did Hunter take away? “I feel the best strategy for me is to find a good company to buy low and then get out” when he’s made a decent profit. As the professionals say, “Pigs get fed and hogs get slaughtered.” That is a great life lesson Hunter learned early and with comparatively little pain. So far, his Nvidia stock has done great.

My ’tween and early-teen nieces and nephews rolled their eyes when I made the seed money for the contest their holiday present of 2014. They’d much rather have received a toy or cash to spend as they wished. But my plan was to wear them down. I bugged them until they named a stock. And then I started e-mailing regular updates to them — which they almost never acknowledged — and cc’d their parents and grandparents in hopes that it would inspire conversations at home. Eventually, those e-mails did get some parents, cousins and uncles on board. As more family members joined and talked about the contest, the kids got more excited, too. We benefited from a different kind of compounding “interest.” Their interest in investing grew because of the reinforcement of the quarterly updates and the family conversations among a growing number of their family members.

Young people are probably going to pick stocks of companies they are familiar with, or those getting a lot of buzz from influencers they follow on social media. So it’s important for the oldsters to use their picks to serve as counterpoints. Uncle Jim, 79, the patriarch of the family, was eager to join the contest because “it is just a wonderfully sneaky way of introducing kids to the realities of investing” and the ups and downs of the market.

To emphasize his view that stocks currently are overpriced, Jim chose to put his money in cash — a money market account currently paying a little more than 4%. Lately, that’s put him smack dab in the middle of the rankings. He hits “reply all” to every update and makes his case to his grandkids and the other participants that he thinks stock prices are likely to fall because they have risen much faster than corporate earnings. And he reminds the kids that they can switch to safer investments if they choose.

Kim Clark is a veteran financial journalist who has worked at Fortune, U.S News & World Report and Money magazines. She was part of a team that won a Gerald Loeb award for coverage of elder finances, and she won the Education Writers Association's top magazine investigative prize for exposing insurance agents who used false claims about college financial aid to sell policies. As a Kiplinger Fellow at Ohio State University, she studied delivery of digital news and information. Most recently, she worked as a deputy director of the Education Writers Association, leading the training of higher education journalists around the country. She is also a prize-winning gardener, and in her spare time, picks up litter.