Teaching your children about investing may seem like a daunting task, but it doesn’t have to be.
By starting early (even as young as 5 years old) and making it a regular part of their education, you can give your child a good start towards a healthy financial future.
There are a number of different ways to teach your children about investing. In this post, we’re going to cover eight of them.
Here are 12 things you do to get them started:
1. Read Books About Investing
Reading books about investing with your children can help make the concept more accessible. Look for books written specifically for kids and teens that cover topics such as mutual funds, bonds, and other types of investments in an age-appropriate way. You can also incentivise your kids with rewards – one of my Blueprint students pays his children $100 for every financial book they read, which then goes into their investment fund for the future.
2. Use Rules of Thumb and Quotes as a Teaching Tool
We have all heard clichés such as:
- “History doesn’t repeat but it rhymes”
- “Markets can remain irrational longer than you can remain solvent”
- “Be fearful when others are greedy and be greedy when others are fearful.”
These are great for teaching them core principles of good investing practices.
3. Use Games and Activities
Using games or activities to teach your children about investing can help make the subject more interesting and fun. Games like the stock market game or investing board games can help children understand investment concepts in an engaging way. A good one is Robert Kiyosaki’s Cashflow 101 board game.
You can also teach your kids about the pitfalls of speculation by playing a coin toss game. They will have to pay $1 to get in on the game and if the coin lands on heads, they will win $1.50. It is a good lesson to learn when they are young rather than by gambling with big bucks as an adult.
5. Involve Them in Family Financial Decisions
Involving your children in family financial decisions can help them understand how to make smart investment choices. Ask their opinion on decisions such as buying a new car or deciding which mutual fund to invest in.
You can also involve them when you’re investing in a business or property. Have them research and make presentations on different options, as well as compare costs, benefits, and risks.
6. Open a Savings and Investment Account For Them
Opening savings and investment accounts for your children can help them get used to the idea of saving and investing their money.
Get your child a bank or box to hold the allowance they have earned. As they watch the money grow, they will see how rewarding it is to earn their own money and how patience pays off.
You can also have them create a chart on a whiteboard so that they can track their progress. For more advanced children, try offering them an interest rate so they can begin to understand compound returns.
7. Create Financial Goals With Them
Have your child come up with a short-term savings goal (1 month) and then a long-term goal (1 year).
A short-term goal will keep kids interested as the reward is within their reach. Seeing the finish line up ahead will keep them moving forward. The longer-term goal will help them stay focused on the larger reward down the road.
Make sure that your child sets these goals rather than you. If they set them, they will take more ownership of their success.
7. Help Your Child Budget
Give your child a reasonable amount of control over their money.
Let them spend some of their allowance or give them a gift card to use and they will begin learning about the value of money and the value of searching for the best deals rather than impulse buying. For an added incentive, let them keep anything that is left over.
8. Participate in Charitable Giving
Teaching your children about charitable giving is a great way to show them the importance of investing in others. Have your child participate in decisions about where and how you can give money, and help them understand the impact of their choices.
There are also many ways to volunteer together, such as helping the elderly in your community or collecting items for a food drive. These activities will help your child understand that they have the power to make a difference in their world and the privileges they have to do so.
9. Use Everyday Situations as an Opportunity for Learning
A great way to help kids understand finances is by using real-life situations. When you eat out, challenge them to figure out the bill before you receive it. Are you going on a family outing to the zoo?
While waiting in line, ask your child whether it would be a better deal to buy a family pass or to buy one ticket for each person. As your child gets older, you can make this more challenging. For example, let them figure out which bank would be best to put their money in, factoring in fees and interest rates.
10. Bring Them Along To Visit Professional Financial Planners
Bringing children along to visit professional financial planners can be extremely beneficial. Not only will they gain valuable knowledge, but they will also be able to build connections with professionals they can call upon in the future. Many financial advisors are happy to answer questions and offer advice, even if you don’t plan to invest with them.
11. Invest For Real
After you have taught your kids the important lessons above and they have saved enough money, assist them with opening a brokerage account or you can hold a stock or fund for them. If you choose to try the stock, have them pick a company that they are familiar with and utilize regularly.
By doing this, it will make it more real for them. They will understand that a stock is an investment in a real business, not just some ticker symbol. If you decide to go with a fund, you can teach them about expense ratios and the importance of low fees.
Encourage them to invest in a diversified fund or a safe blue-chip rather than a more risky investment that could fail and discourage them. However, do not be afraid to let them make some mistakes. They can be valuable learning experiences.
12. Remind Them That Financial Success is a Journey
The most important thing for your children to understand is that financial success is not a destination, but rather a journey. Help them to recognize the importance of being smart with their money and developing good habits, even when there are no immediate rewards.
Show them that it is possible to become financially secure, even if it takes time and hard work. By instilling these values in your children from an early age, you can ensure that they have the skills necessary to make sound financial decisions for the rest of their lives.
Conclusion
By starting early and making investing a regular part of your children’s education, you can give them the skills and confidence they need to make smart financial decisions.
Show them the importance of saving money, investing wisely, giving back, and use everyday situations as learning opportunities. Remind them that financial success is a journey, not a destination.
And most importantly, remember to make it fun! Celebrate their successes and guide them through their mistakes.
Your support can make all the difference.
Best of luck,
Terry
P.S. Children learn most from modelling their parents’ behaviour. That’s why it’s important to set an example and practice what you preach.
If you’re a parent, and you’re still unsure about investing, don’t worry – you’re not alone. There are plenty of resources available to help you. In fact, here are 3 resources that can help you get started:
- The first is my comprehensive blog post: Going From Absolute Novice To Confident Investor (The Complete Stock Investing Guide). It goes through all the steps you need to take in order to become a confident investor and reach your financial goals.
- The second is our FREE 10 Stock Criteria Checklist, which helps you identify what I consider to be the financially strongest 1% of stocks in the market at any time in less than 5 minutes. Click here to learn more.
- The third is our FREE 90-Minute Online Masterclass, where I’ll show you how I personally anticipate market crashes in advance and prepare for them. Click here to learn more if you’re interested.
