For adults, financial counseling often highlights the significance of making wise investments with your money. This isn’t just for your own benefit, but also for your children and future. Why? Because putting a good portion of your income into investments can lead to a life of financial ease and stability.
Financially savvy individuals know that the sooner you start investing, the better off you’ll be. This is because the longer your money is invested, the more time it has to grow. Unfortunately, many people don’t realize this until they get their first serious job in their twenties.
We all want a head start, right? Luckily for your children, they can begin investing much earlier with your help. Here are six tips to get your kids on the road to smart investing.
1. START WITH THE BASICS
The best way to introduce your kids to investing is by teaching them the fundamentals. Adjust your explanations based on their age. Begin by explaining the difference between saving and investing. Use simple language they can understand. For example, talk about not putting all your “eggs” in one basket, which is called diversification. Break these ideas down in a way that’s easy for them to grasp. Explain that the main goal of investing is to grow their money. Describe a stock as a small piece of a company. These straightforward conversations can be very effective.
2. HELP THEM FORM A STRATEGY
Investing in stocks is a common and effective way to grow money, but choosing and managing stocks is key. Teach your kids how to create a strategy for picking and keeping stocks, and guide them on when to buy and sell. Stress again the importance of diversification in their choices.
3. INTRODUCE THEM TO STOCKPILE
Investing can be intimidating because of the costs involved, with most stocks having high price tags that might scare off young investors. Stockpile offers a solution. You can gift kids stock gift cards that they can use to start their Stockpile account. This lets them buy fractional shares in companies they like, such as Apple or Amazon. They can then track their investments, buy, sell, or trade stocks. Stockpile also allows kids to add stocks to a wishlist and share it with family and friends.
4. USE INFORMATION RESOURCES
Sometimes talking isn’t enough. In these cases, use resources and visual aids to help your kids understand investing. Websites like TheMint.org are great for children and teenagers, breaking down complex ideas into easy-to-understand sections. They offer useful tools like “The Compounding Calculator” and “Topics for Talk Challenge,” which provide a practical start for kids and guidance for parents. Show your kids your own portfolio and charts for hands-on learning.
5. LET OLDER KIDS INVEST MORE
When your kids are teenagers, they might be ready to invest more independently. With a basic understanding and some experience, you could consider giving them around $1,000 to invest. Let them decide how to invest this amount but ensure it remains untouched for about five years to allow them to experience a full economic cycle. This will deepen their understanding and show how the economic cycle affects investments.
6. KEEP IT ENGAGING AND FUN
It’s crucial to make investing fun and engaging for kids. If it feels like a chore, they’re less likely to stick with it. Talk about companies they know and like, such as Disney or Apple. Use relatable examples to explain concepts.
THE BOTTOM LINE
Investing can be complicated, so knowing when to introduce it to your kids can be tough. But there’s no need to rush into actual investing right away. Starting early helps demystify complex terms and concepts, making kids comfortable with investing. Using tools like Stockpile gift cards, you can give them a hands-on, cost-free introduction to real-life investing. They can also track their stocks live. Teaching them early provides invaluable knowledge and skills, setting them on a solid investing path by their teenage years. This way, they’ll be financially savvy by their twenties, 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?