As adults, we’re often advised to make smart investments for our financial well-being. This isn’t just for our benefit but also for our children’s future. Investing a good part of your income can lead to financial security and comfort.
Many financially savvy individuals know the earlier you start investing, the better. The longer your money is invested, the more it can grow. Unfortunately, a lot of people only start thinking about this when they get their first serious job in their twenties.
Wouldn’t it be great if we could give our children a head start? Thankfully, with some guidance, they can begin investing much earlier. Here are six tips to help your kids start smart investing.
1. START WITH THE BASICS
Begin by explaining the fundamentals of investing to your children. Keep it simple, adjusting your explanations to their age. Start with the difference between saving and investing. Use easy-to-understand language and examples, like not putting all your “eggs” in one basket, to explain diversification. Share that the goal of investing is to grow wealth and that a stock is a small part of a company. Honest, straightforward conversations are the best way to teach them.
2. HELP THEM FORM A STRATEGY
Investing in stocks is a primary and effective method of investing. Show your kids how to create a strategy for choosing and managing stocks. Teach them when to buy and sell, emphasizing the importance of diversification. Explain that they don’t need to be adults to start investing.
3. INTRODUCE THEM TO STOCKPILE
Investing can be daunting due to the costs involved. Stockpile offers a solution by allowing you to gift stock gift cards that kids can redeem. They can then buy shares in companies they like, such as Apple or Amazon. This way, kids can track their investments and even create a wishlist to share with family and friends.
4. USE INFORMATION RESOURCES
If verbal explanations aren’t enough, use visual aids and resources to help your kids understand investing. Websites like TheMint.org cater to children and teenagers, breaking down complex concepts. The site offers tools like “The Compounding Calculator” and guides for parents. Share your portfolio with your kids for a practical learning experience.
5. LET OLDER KIDS INVEST MORE
When your kids reach their teenage years, they might be ready to invest more independently. With a basic understanding of investing, consider giving them a larger sum, around $1,000, to invest. Allow them to manage the funds independently for an entire economic cycle or five years, teaching them valuable lessons about investment and economic influences.
6. KEEP IT FUN AND ENGAGING
To keep your kids interested in investing, make it enjoyable. If it feels like tedious homework, they won’t stick with it. Discuss companies they know and love, like Disney or Apple, and use relatable examples.
THE BOTTOM LINE
Investing can be complex, and figuring out when to teach your children about it can be tricky. There’s no need to rush into actual investing. Starting early simplifies complex terms and concepts, making kids more comfortable with the ideas. Resources like Stockpile gift cards offer a child-friendly way to experience real-life investing. Teaching your kids early equips them with essential tools and knowledge, preparing them to be financially savvy by their teens and twenties. They’ll be ahead of their peers and already saving significantly. So, when should you start teaching your kids about investing, and what other resources can you use?