Blue Chip Kids
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The essential guide to being smart about money and investing

Blue Chip Kids: What Every Child (and Parent) Should Know About Money, Investing, and the Stock Market is a fun and easy-to-understand introduction to the world of money and investing for kids and parents. Frustrated by the lack of entertaining financial teaching materials for his 13-year-old son, this book is the result of a father’s commitment to pass on one of life’s most important skills. Written by David W. Bianchi—an investor and lawyer with an economics degree from Tufts University—this hands-on resource demystifies the basic principles about money matters and shows what it takes to spend, save, and invest wisely. Filled with simple examples and numerous illustrations, this easy-to-read book discusses money and investing in 100 bite-size topics.

For every parent who wants their children to develop the skills to invest wisely and become responsible money managers, regular savers, and to earn money while they sleep, this book is a must-have.


Preface xv

A Note to the Reader xvii

Acknowledgments xix

Chapter 1 Money, Money, Money 1

The Journey Begins 1

Money from around the World—It’s Not All the Same 5

The Euro: What’s That All About? 10

Exchange Rates and Currency Exchanges 14

Different Ways to Make Money 18

Bitcoin 27

Chapter 2 Different Ways to Pay for Things 29

Checking Accounts 29

Electronic Bill Payment 31

Electronic Banking 33

Credit Cards 33

Debit Cards 36

Wire Transfers 37

Chapter 3 The Stock Market Is Cool 39

Stock Markets and Stock Exchanges: What Is the Difference? 39

What Is a Stock Market? 39

Wall Street and the Stock Market 40

Stocks 47

Stock Certificates 51

Market Cap 52

Bid/Ask/Spread 53

The Free Market and Valuation 54

When Can You Buy and Sell Stocks? 56

Stock Market Indexes 56

Initial Public Offerings (IPO) 59

The Securities and Exchange Commission 65

Market Correction 65

Market Rally 66

Chapter 4 Let’s Buy and Sell Some Stocks 67

Buy the Dips 67

Bulls and Bears 68

Paper Profits and Paper Losses 69

Risk On/Risk Off 69

Stock Charts 70

Market Top 72

Market Bottom 73

Trading Range 74

Being Long a Stock 74

Being Short a Stock 75

High-Frequency Trading 80

Fully Invested 82

Leverage 82

Chapter 5 Stock Options (Impress Your Friends with This One) 86

Options and the World of Puts and Calls 86

Options: How They Work 87

Options Expire: They Don’t Last Forever 88

Puts 88

More about Puts 90

The Underwater Put Option (Say What?!) 92

Calls 94

More about Calls 97

The Underwater Call Option 99

The Naked Call Option (OMG, Did You Say Naked?!) 100

Trading Options 102

Chapter 6 Funds (Giant Pools of Money) 104

What Is a Fund? 104

Index Funds 105

Mutual Funds 107

Hedge Funds 111

Chapter 7 Bonds and Certificates of Deposit (Sounds Boring but It’s Not) 114

Bonds 114

Yield 117

U.S. Treasury Notes and Bonds 118

Basis Points 121

Certificates of Deposit 124

Chapter 8 Analyzing Companies (Seriously, This Will Make You Very Smart) 127

How to Analyze a Company to See If You Want to Buy Its Stock 127

Price/Earnings (P/E) Ratio 131


Market Share 138

Earnings Season 141

Guidance 143

Dividends 144

Special Dividends 145

Stock Buybacks 146

Transparency 150

Private versus Public Companies 150

52-Week Moving Average 153

Chapter 9 Borrowing Money (Don’t Borrow Too Much—Ever!) 155

Mortgages 155

Amortization 158

Credit Ratings and Non–Real Estate Loans 160

Default 166

Bankruptcy 167


Chapter 10 Interest Rates (Making Money While You Sleep) 170

Simple Interest 170

Compound Interest 172

Annual Percentage Rate (APR) 175

Chapter 11 Net Worth (What’s Your Stuff Worth?) 177

Assets 177

Liabilities 177

Net Worth 178

Financial Statements 179

The “Oracle of Omaha” 181

Chapter 12 Taxes (The Lower, the Better) 183

Gross Income 183

Net Income 183

Taxes 184

Audits 192

Chapter 13 The Economy (The Business of Business) 195

The Federal Reserve (The Fed) 195

Gross—As in Really Gross—Domestic Product (GDP) 198

Budgets 202

Budgets in Action 203

Our National Debt 204

Deficits and the National Debt; So What? What Do They Have to Do with Investing? 205

Chapter 14 Venture Capital and Private Equity (Big Bets Chasing Big Profits) 207

Venture Capital (VC) 207

Private Equity 213

Chapter 15 Money Smart (Move to the Front of the Class!) 214

Retirement Savings 214

Your Mission, Should You Choose to Accept It 218

You Are Now Money Smart! 219

Chapter 16 And So It Ends—or Maybe This Is Just the Beginning 220

Disclaimer 223

About the Author 225

Index 227


“The financial fundamentals are all here in this book so that kids can understand them and adults can use them, too…. I’ve got my copy and I’m not giving it up.”—XETV San Diego

“I wish someone would have read this to me when I was a kid.”—WYAM Alabama

“Fantastic!”—WXIA Atlanta

“What a great book…There is nothing else like it on the market.”—CKWS Canada

“This is really a great idea… If kids learn to put money away at an early age, there is no limit to the wealth they can have in the future.”—WPTF Raleigh, N. Carolina

“Covers all the bases.”—WUSY Chattanooga, TN

“Our kids thank you and we thank you as moms and dads because we’re going to learn, too.”—WKYC Cleveland

“This is truly the gift that keeps on giving…I hope a lot of parents have their kids read this and learn from it, too.” —WGHP Greensboro, N. Car.

“I love that you are doing this.”—WFTX Ft. Myers, Florida  (Fox)

“I believe in what you wrote so much… You have hit a genius topic here.”—Ron Sege Show, USA network

“We are fighting over who gets to read this book first… This is really, really something that a lot of people are going to benefit from.”— KOB Albuquerque, New Mexico

“I’ll be holding onto this book myself… It is really easy for a kid to grasp.”—KBAK Pittsburg, Pa. (Fox)

“I love the concept behind this book.”—KABB San Antonio, Texas

“Very important book.”— GOOD NEWS PLAN

“Very effectively done.”—WKXL Concord, New Hampshire