What You Need to Know About Taxes When Kids Play the Market

My kids play the market. Well, sort of.

I wanted them to start learning about money—and yes, taxes—while they were young enough to make mistakes and ask questions. So I gave each of them some money and told them to invest it.

My youngest has enjoyed a terrific return, prompting him to lament, “I wish my eight-year-old self knew to buy more Sony.” My oldest—despite her best efforts—lost money when one of her investments went south. And my middle didn’t see any increase, since she opted to keep it all as cash, but she boasts, “I haven’t lost anything.”

Such is the nature of investing, right? You tend to expect your portfolio to increase in value, but it’s bound to hit some bumps. Fortunately, when the markets go down, most investors don’t actually lose real money—they have an unrealized loss, or a loss on paper.

But what happens when kids buy and sell?

For more, read Tax Advice for Parents Since Teens Like to Play the Market, Too (on Bloomberg Tax, outside of the paywall).

Every week, you can find my column on Bloomberg Tax. Currently, there is no handy notification or alarm when my column goes live on Bloomberg – but that could be changing soon. For now, I’ll post the links here on Taxgirl. And for even more tax news, follow me on Twitter at @taxgirl.