Investing may have always seemed like something for staid old men, but chances are, these stuffy old gents started out surprisingly young. If you have small, or even not-so-small-anymore, children, then it’s never too soon to teach them about investing. You just have to go about it in the right way.
Realistically, you need to wait until your child starts to show an interest in money. Once they realise that 50c buys them their favorite candy and so $1 buys them twice as much – that’s the time to strike. You can begin with the humble old piggy bank so they can watch their money accumulate, then maybe move onto a compartmentalised piggy bank that has slots for spending, saving, donating to charity and investing.
Teach the difference between saving and investing
You may have looked at the piggy bank idea and wondered why there were bellies for saving and investing. There is a difference – saving is putting money aside without risking it in any way. You may earn interest, but other than that, there’s no real opportunities for growth. Investing – in a company or a stock – means more risk, but there’s some big growth opportunities.
Kids can start off by saving and watching compound interest do its thing – they’ll love it – and once they have a decent amount, they can take some money out and invest it. It may be in a company they’re a fan of, or in some Star Wars figures, or some rare silver dollars from Golden Eagle Coins; whatever they choose, they need to see the value of their investment change over time and learn how to work those changes.
You’re raising an adult, not a child
One day your little girl or boy is going to be a woman or a man and so by teaching them about investing, you’re helping to make sure they’re comfortable. As hard as it is to consider, you won’t be here forever, so helping them to become financially savvy and independent is a good move for everyone. OK, your 18-year-old hasn’t made her first million yet, but she’s got a decent wedge and she knows how to keep it growing. It’s about forming habits as much as anything.
Let them play
There are lots of dummy trading and investment platforms out there and older children can have some fun creating their virtual portfolio and tracking their investments. They’ll fall over a few times, but that’s an important part of the learning experience. If you can find a mobile app that your children like, then this will help them to see it as a game – until they decide to get serious, of course.
Buy them a variety pack
Ask your kids to pick out their top five or ten favorite companies or brands – you can already imagine what some of the names on the list will be… Buy some shares in them and let your kids watch the fortunes as they go. This is another valuable lesson, because if their all-time favorite sneaker-maker loses money, then they’ll learn not to be swayed by emotion and loyalty.
Lastly, remember to give back
That one belly in the piggy bank – donating – is possibly the most important of all. There’s little point in earning and making money if you just horde it all. Giving money to charity is a highly rewarding thing to do, even if it’s just a few dollars a year, so set this habit down early, because we all benefit in the long run.