Teach kids the ABCs of investing

USAA First Start Growth (UFSGX), which is explicitly geared toward kids, has always had such restrictions on its portfolio. This is a more personal standard than the other ones above, and it is one that parents might want to discuss between themselves and with their kids.

If you do decide that you'd like a fund that screens out certain kinds of stocks, you can use Premium Fund Screener to find socially responsible funds, most of which at least shun alcohol and tobacco stocks. However, you'll also need to look at each fund individually to see whether its standards are ones with which you agree, because funds can differ greatly in their definitions of "socially responsible" investing.

• Video: Dividend stock plays

With all this in mind, here are some funds to consider if you have a child or teenager who's dipping his or her toe into the waters of investing. Of course, these aren't the only kid-friendly funds out there; judicious use of the screening tools mentioned above can help you find other candidates fitting the criteria that are most important to you. However, this list provides a good starting point for young investors.

Vanguard STAR

If you want to teach kids about the importance of low fund expenses, there's no better place to start than Vanguard.

Some of Vanguard's most popular funds, such as the Vanguard 500 Index (VFINX) fund, are geared more toward older, more experienced investors, but Vanguard STAR (VGSTX) is a good option for beginners. It provides exposure to 11 Vanguard funds of various asset classes, including significant foreign exposure, and its track record is outstanding. A major factor in that good track record is the fund's rock-bottom 0.35% expense ratio. It does require a $1,000 initial investment, with or without an AIP, but nearly all other Vanguard funds require at least a $3,000 minimum, making this the best entree into this world-class family of funds.

Pax World Balanced

Pax World Balanced (PAXWX) is one of the best socially responsible funds out there, with a strong long-term track record and reasonable expenses. It also has a very low $250 minimum initial investment, whether or not you set up an AIP, making it an attractive starter fund.

The fund keeps 25% to 45% of its assets in bonds, which makes it a bit conservative for most kids' needs, but it also provides significant midcap and overseas exposure, which can be hard to find in socially responsible funds.

T. Rowe Price Spectrum Growth

T. Rowe Price Spectrum Growth (PRSGX) is a fund of funds. It's a good way to obtain diversified, actively managed stock exposure.

It invests in nine T. Rowe Price equity funds ranging from small to large cap, value to growth and domestic to international, and it has compiled one of the best long-term records in the large-blend category. Plus, like all T. Rowe Price funds, it's friendly to beginning investors; you can start an AIP with just $50 to start and $50 per month after that.

Ariel Appreciation

Ariel Appreciation (CAAPX) has struggled lately, but we have enough confidence in veteran manager John Rogers that it remains an Analyst Pick in the midcap-blend category.

Rogers avoids tobacco, firearm and nuclear-energy stocks and prefers firms that are environmentally friendly and cultivate diversity. It's also an easy fund for youngsters to get into; you can set up an AIP with no money upfront and $50 a month thereafter. On top of all this, Ariel maintains a number of educational initiatives to help disadvantaged young people.

This article was reported and written by David Kathman for Morningstar.

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