The easy way for students to invest in stocks

Students can earn more than just pocket money. There are several companies that offer Employee Stock Purchasing Plans (ESPPs)—along with other benefits—to part-time workers. That’s right, employees don’t always have to be full-time or salaried to be offered stock options. Starbucks, Best Buy and Lowe’s are just a few of the companies that let teens become shareholders, whether they make lattes or stock shelves. “These are all companies where you’d love to have those kinds of stocks in your portfolio. And for a young student, they can’t go out and find a stock broker or [don’t] have enough volume to trade on their own discount brokerage account,” says Scott Anderson, an employee benefits consultant with HUB International STRATA Benefits Consulting. “So for them to be able to buy in small increments is a real advantage to them.” Am I saving enough for retirement? » Starbucks Canada has been known to offer their employees many benefits depending on how many hours they work. The coffee giant also offers their employees something called Bean Stock. This stock option allows employees to purchase a fixed number of Starbucks shares for a fixed price during a 10-year period. As portions of their Bean Stock vest, the employee can choose to exercise the stock and either sell it or hold it to grow their money even more. Part-timers need to have been paid for a total of 500 hours to be eligible for this stock option. Stock investment plans allow Starbucks employees to purchase shares of stocks every quarter at a 15% discount from market price. Employees can choose to enroll in the plan and contribute between 1% and 10% of gross base pay, which is deducted from their paycheque. The money is collected and used to buy shares every financial quarter. To be eligible for the program, the employee needs to have worked at Starbucks for at least 90 days and have been paid for an average of at least 20 hours per week over that time. It’s a similar deal for Best Buy employees. Employees can contribute between 1% and 20% of their paycheque. The money is collected and used to purchase stock every six months at a 5% discount from market price. Part-time or full-time, any employee 18 years or older is eligible to snag Best Buy stock through the program after 60 continuous days of service. Let’s see how this would work for a part-time Best Buy employee that works 20 hours a week and contributes 5% of their wages to the program.

Contributions	Calculations
Eligible compensation per paycheque	$400
ESPP contribution percentage	5%
ESPP dollar contribution per pay period	$20
ESPP six-month contribution ($20 x 13 pay periods)	$260

Suppose that Best Buy stock is worth $22.20 per share at the end of the first six-month offering period in July 2015, which discounted 5% is equal to $21.09. A semi-annual contribution of $260 can purchase roughly 12 shares. Assume the employee works at Best Buy for the next three years and accumulates a total of 67 shares purchased at various fluctuating market values before deciding to sell in March of 2018, when shares are worth $38.63. The part-time employee contributed $1,560 to the program and sold the stocks for $2,588.21, meaning they made an extra $1,028.21 during their time at Best Buy that they can reinvest or put towards savings. Employees also have the option of keeping the stocks in their portfolio after leaving the company. Where to invest $1,000 now » Anderson says that employees, young or not, often don’t participate in employee share programs. This is partly because they don’t understand what they’re being offered. “I’d really suggest they use whatever company resources are there to understand and if they don’t know, to go talk to somebody in HR and find out because it’s a really valuable tool to have.” Even employees that do understand how the program works may opt out of participating because they think their student incomes are not enough to get into investing. However, most employee stock purchasing plans are facilitated through automatic payroll deductions, which Anderson says is a great way for young people to contribute and save without feeling the pinch as acutely. If they still find that having the extra money to contribute is difficult, he says to start participating after their next raise so the difference is less noticeable. While employee stock plans are a great way for young people to start investing, it should be a first step to developing a diversified portfolio, a nudge in the right direction. Having all investments in a volatile stock market is obviously never a good idea, Anderson advises, and something that young people should keep in mind. “Definitely take the option of the employee share plan; just don’t make it the only thing that you own.”