Why you should teach your kids to invest?
It’s never too early to teach children about investing. We already know that it’s better to start investing at the earliest possible time. But we always assumed that investing should be delayed in our early 20s or as soon as we start earning money. Not a lot of people think that children could already start investing.
It must be said, though, that teaching children about investing doesn’t end in using your own money and investing it under the name of your child / children. It is better to teach the kids what investing is all about, so they will know its importance at such an early age. By teaching them about investing, children will have a better understanding of its advantages and such act will be ingrained in them that it almost becomes a habit. So how do you teach kids about investing?
Important points to consider when teaching your kids about investments:
Concept of money
As soon as your child can already understand the concept of money, he or she is ready to learn about investing. There is no ideal age for this. If you have a toddler who already knows how money and trading works, then that is great! Maybe he or she is ready to learn about investing. But perhaps when he or she starts school, there will be a better understanding about money. Then this would also be an opportunity to give your child an allowance very time he gets a perfect score on exams or every time he gets good grades or if he does is chores. The allowance doesn’t have to be much. It could be a dollar or less a day
This will make him realize that working hard means compensation. And once he starts “earning” money, he can start saving and eventually, investing.
Make investing a family activity
While discussing about investing with your kids, you could also share your investment portfolio with them. Make investing a family bonding activity. If you are investing on stocks, you could make the actual investment activity together. Then you can discuss how your investment can earn more. You could even have the discussion while enjoying a game of Monopoly. That board game is a great way to discuss investments—it will make it more fun. The game is basically about investing on a building or property and letting people who pass through pay a fee, which now becomes your earnings.
Read children’s books
You can teach children about investing while playing a game of Monopoly. And at the same time, you may also teach children about adult stuff with children’s books. One such book is called The Little Red Hen. It tells the story of a hen which toiled to turn wheat into bread: from sowing the seeds to the harvest and eventually to making the dough. Throughout the process, the other animals were just idling around. So when it was time to eat, the hen was the only one enjoying the fruit of its labor.
There is also an Aesop’s fable with a similar lesson: The Ant and the Grasshopper. It tells the story of an ant carrying, storing and saving food during the summer that he can use during the entire winter. The grasshopper was just hopping around, having fun, even mocking the ant. But when winter came, the grasshopper was too cold to look for food and had to beg the ant for some.
Here are some books you could read to or with your child / children as recommended by US News:
- The Money We’ll Save
- A Chair for My Mother
- Coat of Many Colors
- How I Learned Geography
- Fancy Nancy and the Fabulous Fashion Boutique
- Those Shoes
- When Times are Tough
- Amelia Bedelia Means Business
- How to Steal a Dog
- Hothead
- Becoming Naomi Leon
- Where the Mountain Meets the Moon
- The Mighty Miss Malone
- Okay for Now
- The Not-So-Great Depression
Warren Buffett, one of the richest men in the world, also realized the importance of using children’s tools to teach children about investing. He created an animated series called Secret Millionaires Club. It offers children tips on how to invest through fun and enjoyable activities. The series taught children about money management.
Practical lessons
Give children practical lessons in order for them to understand what investing is. Again, this goes back to Monopoly. That’s one way to teach children about investing. But it’s basically a game. So in order to showcase how this really works, you can show them how it really works with actual props, like plants. You can acquire some seeds and teach your child how to plant it. You teach your child to take care of it by watering it and making sure it gets some sun. Eventually, the first leaves will come out and guaranteed your child will be delighted. He will finally see the fruit—or in this case leaf—of his labor. That is actual investment: putting in time, effort and resources in order for a plant to grow—for an investment to grow.
Buying and tracking
When your child has had enough lessons, it might be about time to level up. It should be about time to discuss stocks and buying them. Try to discuss the different options with your child—but only after you discuss the best options with an expert. You want your child to be able to choose the stocks he wants to invest in, so you should be able to discuss the pros and cons of a certain stock. And once you’ve sealed the deal, you could track your stocks if these are doing well or not. Also, you have to teach your child to record how your stocks are doing so the act becomes a regular activity for them until they are adults. A lot of adults don’t even know how stocks actually work.
It’s never too early to teach children about fiscal management and investments. But you have to adjust how you deal with the matter with them. Explain investment to children in a language they will understand, so the keys are simplicity and fun. Keep discussion simple and engaging so investing becomes a fun activity for them.
