If you have children, you know that part of raising them is helping them understand the value of money so they can succeed in life. It teaches responsibility and requires critical thinking. These days’ children are so invested in brands like Nike and Apple, why not teach them about the financial side of the company? It may seem odd to talk to your children about your personal finances, but in the long run talking to them about finance & investing could set them on the right path moneywise later in life. The Wall Street Journal says that “When money matters become part of the dinner-table conversation, raising investment-savvy kids can be as simple and painless as filing a 1040EZ.” Today we want to touch on some tips for teaching your children about investing.
Start early – You should keep it simple, no financial jargon that they won’t understand. When they are young create a savings account for them. Starting with an allowance is always a great place to begin in teaching your child financial responsibility. Through the years let them put a portion of their allowance in their savings so they can see the interest growing their money. When they reach driving age or they have a job consider getting your child a debit card so they can see how much money they are making and learn to prioritize what that money should be spent on, ie. Car insurance, school fees, college.
Explain to them investing as buying into companies – We found that the below story from The Wall Street Journal is an excellent example of how someone taught his children about investing:
“Jason Moser, an analyst with Motley Fool, an online investment-research company based in Fairfax, Va., says he introduced investing to his two daughters, Hannah, 8, and Ainsley, 6, two years ago when the family stopped at a Panera Bread Co. for lunch. Mr. Moser says he casually mentioned to his daughters that "we own a little bit of this restaurant."
Their quizzical looks led to an explanation of stock ownership, he says. "They thought that was really neat. Panera was not just a restaurant, but something we as a family are vested in," Mr. Moser says.
Mr. Moser advises parents to frame discussions about investing as buying into companies the children know and understand. Every quarter, his girls pick one stock in which to invest. His only stipulation is that they buy a different stock each time to learn the value of diversification.”
Let your children invest in a company they have a connection to – When kids invest they are more likely to understand or be more interested in investing if they invest in a company that they know and love, like Disney or Nike, make investing apart of your daily conversation, says CNN Money. They go on to say, make investing a game for the kids and get the whole family involved & watching the market.
Teach through cartoons & books – If your kids are more inept to learning from visual aids check out the cartoon series Warren Buffet created to help kids learn about the power of investing, Secret Millionaires Club. Forbes says the story revolves around a group of friends who find out their school lost funding for arts programs & extracurricular activities, so they decide to do something about it & consult the help of business mentor Warren Buffet. In an interview with Forbes, Warren Buffett goes into great detail about what are the best options for teaching your kids about investing, click here to read the full article. The US News & World Report has compiled a whole list of investing child-friendly books, see list here.
The below chart is an interesting representation from TIME Money about the effects of talking to your kids about investing:
The investing world can be a scary for us some times, much less a child. So, when talking to your kids about money, keep some of these tips in mind. Knowledge is power, so fuel your children with all the right tools to be financially stable and successful later in life. Regardless of the tips we have discussed today the most important one is to be a good example yourself; kids soak up everything.
Let us know what you think, tell us your thoughts about investing and children. How do you teach your kids about investing?