For adults, financial counseling often stresses the importance of making wise investments with your money. This advice is not just for your benefit, but that of your children and your future as well. Why? Because investing a good chunk of your income can result in a life of financial comfort and stability.
What most financially literate people realize is that the earlier you begin investing, the more advantageous it is. This is due to the fact that the longer your money is invested, the more time it has to grow. Unfortunately, many people don’t come to this conclusion until they’ve landed their first serious job in their twenties.
We would all like to gain a head start, wouldn’t we? Fortunately for your children, they have the potential to begin investing much sooner with your guidance. Here are six tips to get your kids on the road to smart investing.
1. START WITH THE BASIC CONCEPTS
An ideal starting point for introducing your children to investing is to teach them the nuts and bolts of the trade. Naturally, you’ll want to keep explanations simpler depending on their age.
Kick start the conversation by teaching them the contrast between saving and investing. Employ simple language they can easily grasp. Explain the concept of not putting all your “eggs” in one basket, also known as diversification. Break down these notions into terms your kids can understand.
For instance, help your children understand that the basic aim of investing is to create more wealth. A stock, for example, is just a tiny part of a company. The best approach to learning is having these straightforward, honest conversations with your kids.
2. HELP THEM FORM A STRATEGY
Investing in stocks is usually the primary and most effective method of investing. Still, how you choose and manage these stocks is crucial.
Show your children how to formulate a strategy for selecting and maintaining stocks, instruct them on the right time to purchase and possibly sell. Highlight once again the significance of diversification in choosing the right stocks.
Children don’t need to be adults to begin investing. Here’s how they can get involved!
3. INTRODUCE THEM TO STOCKPILE
Investing often becomes complicated due to the costs involved. Most stocks have a high price tag which can deter youngsters from investing early.
However, Stockpile offers a solution. It allows you to gift kids stock gift cards that they can then use to redeem on their Stockpile account. This way, they’ll have the opportunity to buy part of a share in companies they like, such as Apple or Amazon.
Subsequently, youngsters can track their investments, buy, sell or trade stocks. Additionally, Stockpile also allows kids to add stocks to a wishlist and share this with family and friends.
4. MAKE USE OF INFORMATION RESOURCES
Sometimes, explaining concepts verbally falls short. In such cases, help your kids grasp investing notions using helpful resources and visual aids. Websites like TheMint.org are specifically designed for children and teenagers, breaking down sophisticated concepts into understandable chunks.
The website also offers beneficial resources like “The Compounding Calculator” and “Topics for Talk Challenge”, offering a practical start for kids and guides for parents. Show your kids your own portfolio and charts for a hands-on learning experience.
5. ALLOW OLDER KIDS TO INVEST MORE
Upon reaching their teenage years, your children may be ready to invest a little more independently. Having understood basic concepts and acquired some knowledge about investing, you can consider gifting them a substantial sum, approximately $1,000, to invest.
To ensure the full economic cycle or five years, let your kids decide how they wish to invest this amount but insist that the funds remain untouched. This experience enhances their understanding of investing and demonstrates how the economic cycle influences their investments.
6. KEEP IT ENGAGING AND FUN
A crucial step in encouraging kids to invest at an early age is making it fun and engaging. If investing feels like a dreary task or extra homework, they’re unlikely to continue with it. When discussing investing, refer to companies they are familiar with and like, such as Disney or Apple. Create relatable analogies and examples for explaining concepts.
THE BOTTOM LINE
The subject of investment can seem convoluted, so understanding the right time to introduce your children to investing can be challenging. But there’s no rush to dive into actual investing right away. Early start with your kids simplifies the complex terms and concepts, making kids comfortable with investing ideas.
Using resources like Stockpile gift cards, you can offer them a chance to experience real-life investing in a kid-friendly environment at no cost. Your kids can also monitor their stocks live.
Teaching them early can gift them invaluable tools and knowledge, setting them on a solid path to investing by the time they grow into teenagers. Consequently, your children will be financially savvy by their twenties, ahead of their peers, and already saving significantly.
So, at what age should you start teaching your kids about investing, and what other resources can you utilize?
