While the exact number of pint-sized investors is difficult to pinpoint because accounts are often set up in a parent's name, a recent survey showed that 20 percent of American children own mutual funds and 16 percent own stocks. Wall Street is paying attention. After all, today's schoolchildren will be tomorrow's CEOs. Several investment firms have set up websites and launched mutual funds just for kids.

For example, the Stein Roe Young Investor Fund (SRYIX) contains stock in companies that affect young lives, including food retailer Safeway and toy maker Mattel. The prospectus and annual report are written at a child's level. Surprisingly, a portfolio that appeals to kids is a good strategy for all of us, according to Young Investor Fund Manager David P. Brady.

"Children and teens are cutting-edge consumers and our experience suggests that the companies that serve them tend to be exceptionally well managed," Brady explains.

Although Stein Roe has one of the most kid-friendly investment products, other firms are also getting in on the act. Here are a few examples:

On its website, A.G. Edwards features a "Big Money Adventure," where younger kids can play games with Simon Greenbacks and Pixie Profit. If your child wants to invest with a few friends, plenty of information about youth investment clubs is available from The National Association of Investors Corporation.

It's not just investment firms courting the youth market. The kids themselves have their own websites that demystify Wall Street for their peers. Ryan Zacharia started Stockpickz.com at the tender age of 14 after he made a killing investing his brother's bar mitzvah money. Despite writing compelling analysis of P/E ratios and bear markets, Ryan can be just another uncertain teenager. When asked for his top stock picks in a New York Times Magazine profile, he worried aloud about publicly choosing losers and replied: "I have to ask my dad if it's a good idea."

Financially-savvy kids now stash money in stocks and mutual funds. They're forming investment clubs, tracking their portfolios online and playing stock market simulation games. Is this a case of too-much-too-soon?

Not at all, say experts. "It's never too early to begin teaching your children the principles of smart investing," insists Dave Root, president of a Pittsburgh financial advisory firm. In addition, there's a practical side to educating the younger generation about concepts like dividends, compound interest and just plain saving for the future. "Baby Boomers love to spend money and we are not always the best financial role models for our kids," says Root.

Besides, grown-up investors can actually learn a thing or two about stock picking from these whippersnappers. For the same reasons that kids know what's cool long before we do, they can spot potentially lucrative stocks.

By Ellen Kats myprimetime.com