By Neale S. Godfrey

It's to begin by discussing with your teenage son or daughter the basic workings and history of the stock market. If he is interested, let him start his own stock portfolio, or collection of stocks. This can be done for real or your children can simulate the process and gain just as much knowledge.

Your teens must trade through you until they are 18 (or 21 in some states). Include them in your conversations with your broker or financial professional and share all the information you receive, such as brokerage statements and annual reports.

The best place to start is by tracking a few companies that are associated with products your children know and purchase - Nike, McDonalds, Coca-Cola etc. Have your teens look around and pick out products that they use or like and focus on the companies who make the product.

Help Your Child Create an Environmentally Friendly Portfolio

Another good way - popular with idealistic teenagers - is to do a little research and create an environmentally conscious portfolio - companies like Ben & Jerry's, Esprit, and Levi Strauss, known to have a good record on environmental issues.

You are now going to introduce your teen to the world of the financial pages in the newspaper. At first, it looks like a mass confusion of numbers and symbols printed in tiny type. This exercise will open up a new world for your teens as they learn how to decipher the financial pages. They'll discover a new use for these pages, instead of perhaps lining the bottom of the hamster's cage.

While not every paper displays the information in exactly the same format the basics are the same. There are several stock exchanges but the main ones are NYSE and NASDAQ. Some public companies are listed on smaller markets and are known as OTC's or "over the counter." NYSE (New York Stock Exchange) and NASDAQ (National Association of Securities Dealers Automated Quotes) are reported separately. It is helpful to find the legend so you can see what each column of information represents. Not every item of data will necessarily appear in every paper. Listed here are the most common.

The first rule to remember as you review the columns is that stock prices are quoted in fractions of a dollar. For instance, 7 ¾ is equal to $7.75; 5 ½ means $5.50, ¼ is $.25 and so on.

Each stock is represented by letters, called a stock symbol. Coca-Cola's symbol is KO, McDonald's is MCD, Hershey Foods is HSY, etc. Your teen can find the symbol at the library in Standard and Poor's Stock Guide or on line at sites like Hoovers.com, Yahoo.com, etc. The company name is always shown abbreviated. Be careful as you look because many companies have similar names.

Price volatility is reflected by two columns showing the high and low data. This reflects the highest price the stock has sold for and the lowest price it has sold for over the last 52 weeks.

There is a dividend column that shows the cash dividend per share of stock. A dividend is a payment to shareholders of a part of the company's profit. What is shown is the cash value of the latest dividend. The column could be blank meaning that the company isn't expected to pay a dividend. Many NASDAQ companies don't pay dividends.

Another column will state the yield which is the way of stating the stock's current return on investment. This is calculated by dividing the dividend by the price. This is an indicator of how effectively the company is using the money stockholders have invested.

The P/E Ratio

There is a P/E Ratio, which stands for price-earnings ration. It shows the relationship between the price of the stock(P) and the company's annual earnings (E). If the P/E is 12, that means the price of the stock is 12 times the company's earnings per share for the last four quarters. P/E ratio can be used to compare how expensive a stock is in relationship to its earnings. Unpopular stocks usually have low P/Es and popular stocks usually have high P/Es.

There may be a column giving the volume which means sales of shares on the previous day. Often this is "Vol 100's" which means that you need to multiply the figure shown by 100. This shows how much "action" or how popular the stock seems to be.

There will be three figures shown which represent the previous day's activity. They will be the per share prices - the highest price for which a share sold, the lowest price and the price when the stock market closed.

The Net Change column shows the difference between the closing price for the day and the closing price of the prior day. Minus and plus signs are used to indicate the relationship to the previous day.

Assistance in Monitoring Their Portfolios

Help your teens set up a simple tracking system of their "portfolio." They can use a notebook or the computer and develop a good habit. These records are valuable when they want to determine if they should hold or sell a stock, and the dividends they have earned. Help them understand the concept of reinvesting. On stocks that pay dividends, rather than receive a small dividend check, they can sign up for the dividend reinvestment program, Any dividends will be used to purchase additional shares. For young investors this can be a significant advantage over time.

These are the facts they will want to record:

Lastly, explain to your teen that there are many outside factors influencing the movement of the stock market. Here are some of the most important factors to discuss:

* Neale S. Godfrey, a financial expert, has authored 15 books. Her latest book Money Doesn't Grow On Trees is a #1 New York Times Best Seller. She has also created an educational program called The One and Only Common Sense/Cents Series. Neale has appeared on such TV shows as The Oprah Winfrey Show, Good Morning, The Today Show, CNBC, NBC, and CNNfn.

Source: All text by Neale S. Godfrey. All text and characters are the sole property of Children's Financial Network, Inc. All rights reserved.