A Calgary-based financial adviser named Shamez Kassam recently got in touch to ask if I’d be interested in hearing the story of how he got his son, Izmir, launched as an investor. Izmir is 7. He owns shares in companies including Apple, Starbucks and Visa.
One of the questions I get continually from readers is about how parents can best teach their kids about personal finance and investing. In a Q&A, I asked Mr. Kassam and Izmir to tell us more about their investing journey. Here’s an edited transcript of our exchange by e-mail:
Q: I hear from quite a lot of parents who want to teach their children about finance and investing, but the kids are usually teenagers. Tell us how you two decided it was time for Izmir to learn about investing?
A: Being in the investment industry, I’m aware of the power of compounding and I believe in starting as early as possible. When Izmir was 5, I started to keep BNN and CNBC on in the background while playing with him at home, and showed him tickers like Starbucks and McDonald’s. When we went to these stores, I also started explaining how the business operated, how revenue was generated, expenses, and profit, and how that is eventually reflected in the stock. We also talked about how owning a stock is like owning a piece of the business, and how many businesses pay dividends which is better than holding cash in the bank earning nothing. The only downside of this was that we wanted to go to Starbucks and McDonald’s a bit too often.
Q: How much does Izmir have invested and how did his portfolio do in 2020?
A: Izmir has a U.S.-dollar investment account with $5,415. The initial capital was $3,937 and the deposit was made in June, 2019. In 2020, the portfolio returned 22.7 per cent. We initially invested in a U.S.-dollar account so he could invest in companies follows and knows. He does have a Canadian account (not funded yet), and we plan to invest in some Canadian companies this year.
Q: Let’s talk nuts and bolts – what kind of account are you using and where are you doing the investing? You can’t actually have your own investment account until you’re 18, right?
A: I opened In Trust For (ITF) accounts for Izmir. These are informal trusts. I am the trustee, and he is the beneficiary. He saved some birthday money, and I also provided some funds. The plan is to add some money to it yearly. Parents should be aware that once you contribute to this type of account, it is irrevocable, and any funds taken out need to be used for the child’s benefit. When Izmir turns 18, he will have direct ownership of this account, and hopefully he’ll be responsible with it. The investment accounts are held at Northfront Financial, where I am a partner.
Q: What stocks does Izmir own, and how did he (you both) choose them?
A: When we started investing, we sat down and decided to each pick a few names. He is mainly focused on companies that are great businesses and are also products that he (or my wife and I) uses. The stocks Izmir currently owns include the following:
- Apple (AAPL-Q) – Izmir pick
- Walt Disney (DIS-N) – Izmir pick
- McDonalds (MCD-N) – Izmir pick
- Paypal Holdings (PYPL-Q) – Shamez pick
- iShares Nasdaq Biotechnology ETF (IBB-Q) – Shamez pick
- SPDR Gold Shares (GLD-A) – Shamez pick
Izmir adds: “I buy stocks of companies that people use a lot so the stock will go up”
Q: When we invest, we usually have a goal in mind, i.e. retirement. What’s Izmir’s goal?
A: Izmir says, “Money will help me in the future to buy things I need and let me help other kids who don’t have a home, fresh water and things like that.”
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Rob’s personal finance reading list
A travel-reward credit card that sounds better than it actually is
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Business owners, how should you pay yourself?
A discussion of the pros and cons of salary versus dividends paid from a corporation with Neal Winokur, author of The Grumpy Accountant.
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A helpful rundown on how Canada Pension Plan retirement benefits are calculated, with directions on finding out how much you can expect for yourself.
Today’s financial tool
A “periodic table” of annual investment returns for Canadians – find out which were the best and worst performing assets from 2010 through 2020.
The money-free zone
A lot of people have taken up running in the pandemic; I can see them on the streets and I recall a running shoe shortage early last summer. Here’s a handy website I’ve used for years to plan runs by distance – MapMyRun.
What I’ve been writing about
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- Consider this alternative to dividend ETFs - it certainly worked better in 2020 (for Globe Unlimited subscribers)
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
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- ✔️ A 10-point pandemic personal finance checklist: Create a "wartime" family budget; stop worrying about bank deposits; clean out your big-bank savings account; get relief on car payments; get preapproved for a mortgage; WFH? Save $1,000 a month; save, save, save; build resilience by not anxiety-buying; consider the cost of mortgage deferrals; get ready for the second wave of financial distress.
- 📈 Investing: The case for a tight portfolio of big blue chips dividend stocks; robo-advisers beat human advisors (and they’re thriving), why online banks that are better than the branch; is it time to invest your 2020 TFSA; don’t get your mortgage at a bank; why it’s so hard to invest in preferred shares; stock up on stocks to retire early; and are you following the 10-year rule with your investments?
- 💰 Saving: Food waste is wasted money; why you might regret that SUV and find out if CAA is worth it; juice your PC Optimum points; how an ex-Bay Street lawyer got out of debt; blindly easy tweak to your retirement investments to survive economic downturn; should you buy that latte?
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Rob Carrick