Smart investing is one of the best and most reliable ways to grow wealth throughout your lifetime. Unfortunately, one of the barriers to investing for many people is simply that they do not know how to go about doing it. These days, it’s easier than ever before for ordinary people to take a new approach with money and start investing, but if this wasn’t a regular practice in your family, it might not even occur to you to get started. For all of these reasons, it’s important to teach your children about money as part of their overall financial education, and you can do so even if you’re learning alongside them.
Talk About Money
Teaching a child about investing needs to start with talking about money in general. Depending on the age of the child, you can discuss things like income and budgeting. Younger children can help with selecting coupons or can be taught to compare prices at the grocery store. Children can also participate in some family budgeting, such as deciding what to do on a vacation or for family nights. In addition, think about what kind of values you want to convey to your children regarding finances.
Talk About Investing
There are so many ways to teach your kids about money and as part of these ongoing conversations, you should also talk about investing. Children need to understand that it is something that you do over the long term to establish financial stability, not in order to get rich quickly. Small, responsible acts with money today add up over time.
Your child is going to be more motivated to save and invest when they are aiming for goals. You can start small by physically saving cash in a piggy bank or envelopes for whatever the child wants, such as a toy or a trip to an amusement park. This can teach them that there are rewards for delayed gratification. As for investing, it may help to have some medium-term goals as well as long-term ones. It may be difficult for a kid to conceptualize that they are saving money for college, for example. Think about something they can save for over the course of a year in addition to the long-term goal.
A simulator for options trading is a great way for both adults and kids to learn more about stock market trading. You can use a paper trading simulator and virtual currency so that you literally have nothing to lose. Children can learn important lessons firsthand from these exercises, such as the fact that even products and companies that they like might not be good investments.
Open an Account
When you are ready, you can help your child open a brokerage account. You may want to talk to a tax expert about your options. You may need to open a custodial account. You can start with just $100 or even less, and your child can see what happens with real money. This can work even better if you can figure out a way for your child to earn the money, such as giving them an allowance for doing chores around the house.