Exchange traded funds (ETFs) are excellent starter vehicles for young investors because of their simplicity and diversification. Kids and younger adults can easily track ETF performance on financial websites such as Yahoo! Finance or Morningstar. The trick though, is getting kids to get excited about investing in the first place, says Paul Katzeff for Investor’s Business Daily.

Kids can still buy into their favorite companies that they know, such as Disney (DIS), McDonald’s (MCD) and Coca-Cola (KO) through ETFs, but they get more. Instead of buying the individual stock and relying on it to perform, an ETF helps diversify into other companies they might know. It’s simple too because they can own many companies without having to track all of them, there is just one ETF to watch.

There are mutual funds out there aimed at young investors, offering them quizzes and material to better understand investing. Perhaps the ETF providers will realize the importance of teaching kids so they might be the most investment-savvy generation yet.

Tags: UNG