There’s no doubt about it: Passing along financial wisdom to children can help them live better lives, enjoy greater freedom, exercise more control over how they spend their time, and afford a degree of comfort and security that otherwise may not exist. 

A lot of ways exist to help kids build their financial muscles. Many of us utilize common practices like filling up a piggy bank with a child over time, involving youngsters in small purchases using cash, or by the different examples we set, such as sticking to a budget.  

But it’s also important to teach kids lessons in investing, says father of two and Wilmington-based CAPTRUST wealth management advisor Buck Beam. 

So, when it came time to pass on some of these lessons to his own two sons, Beau, 12, and Wayland, 9, Beam was “looking for a way for the kids to connect real money to the stock market and learn about how the stock market works," he says. 

All the Action in Just a Fraction

For the Beam family, it all started with the ubiquitous delivery trucks driving through their neighborhood, dropping off brown boxes adorned with a smile logo. "How about Amazon?" Beau and Wayland said. There was just one problem. The boys' stock pick was totally out of their budget, with a price tag in the thousands of dollars for a single share, says Beam. 

Then he looked into fractional shares. While buying entire shares of stock in big name companies can get expensive, Beam quickly discovered that fractional shares are a fantastic way to get young people excited about investing—and develop valuable financial skills that will be with them for life—without committing a lot of money. 

“The idea of investing some of their own money was thrilling to the boys,” Beam says. They already had some savings—from birthday money and allowance—and Beam was excited to foster their interest. He even upped the ante by pledging to match their investments dollar for dollar.

A Long-term Lesson 

The idea is simple: Instead of buying whole shares of stock, parents, aunts, uncles, grandparents—anyone with a young person in their life—can buy partial shares by the dollar amount. Also called dollar-based investing, this capability was first offered by some technology startup companies, then introduced by companies like Fidelity and Charles Schwab in 2020. With dollar-based investing, even someone with just a little bit of money can buy in and diversify their small-dollar portfolio.

"Investing in fractional shares is a neat activity to do with the kids," says Beam, “And it has the long-term benefit of helping create savers and investors out of your kids and grandkids without putting a lot of money down." 

Hands-On Investing

For Beam's sons, Dad's idea of investing in fractional shares meant they could afford to get into some of the brand-name stocks that they were familiar with. And that got their attention. The boys became very engaged and excited to talk with Beam about their personal stock holdings and their own investment ideas. 

"A lot of kids don't make financial decisions," says Beam. “So, it's very interesting to them to have some skin in the game and then get to live with their decisions."

The experience has shown Beam how he can talk with his kids about the stock market. "This has been the first time in their lives they would ask me questions, instead of me just explaining what I do and why it matters. Now they're curious. They want to understand. Once their money was on the line, they were hungry for more information."