How to teach kids about investing money.
Investing is a great way to grow your money over time. But it can be a complex topic, especially for kids. That's why it's important to start teaching them about investing early. Be patient and don’t be discouraged if it takes awhile for them to understand. Keep exposing them to these concepts and answering their questions. By teaching your kids about investing early, you're giving them a head start. This is a valuable gift that will benefit them throughout their lives.
Tips on how to teach kids about INVESTING money
Explain what investing is and why it's important. Explain that investing is using money to purchase something that has the potential to grow in value over time. Emphasize that investing is a long-term commitment and requires patience and discipline.
Be age-appropriate. Tailor your conversations to your child's age and understanding. You don't need to get into the nitty-gritty details of investing right away.
Encourage saving. Show them the importance of saving before investing and explain that having a solid financial foundation is important before considering investing. Encourage them to set aside a portion of their allowance or earnings to save for investing.
Use simple, real life examples that they can relate to. For example, you could explain how buying a toy that becomes rare and valuable over time is similar to investing in stocks that increase in value. Point out examples of investing in the world around them. For example, you can talk about how your parents or grandparents invested in stocks or real estate.
Make it fun. There are many fun and educational games and activities that you can use to teach kids about investing. For example, you can play a game of Monopoly or invest in a lemonade stand.
Teach about different types of investments. This may be a bit complicated, but expose them to the words “stocks, bonds, and real estate”. Explain there are different levels of risks and rewards associated with each.
Emphasize long term thinking. Teach patience to help avoid making rash decisions based on short term fluctuations. Remind your kids that investing is a long-term game and they shouldn’t expect to get rich quick. It takes time to build wealth through investing.
By following these tips, you can help your kids develop a better understanding of investing. This is a valuable skill that can help them reach their financial goals in the future and give them a headstart amount their peers.
ACTIONABLE ITEMS
Tips for talking to your kids about INVESTING
Keep it simple. Explain that you put money into something you hope will grow in the future.
ACTION: Use a simple analogy like planting a seed. Explain that when you plant a seed, you put it in the ground and water it. Over time, the seed will grow into a plant. The plant will produce flowers or fruit, which you can then enjoy, sell or eat. This is similar to investing. When you invest money, you are putting it into something that you hope will grow in value over time. This could be a company, a piece of property, or even a mutual fund.
Use games
ACTION: If age appropriate, start playing board games (like Monopoly) to demonstrate the concept of investing. In Monopoly, players buy and sell properties, build houses and hotels, and collect rent from other players. This is a good way to teach kids about the basics of investing, such as buying low and selling high.
Explain the risk of losing money with investments. Higher risk usually yields higher returns. Lower risk usually yields lower returns.
ACTION: Explain that there is always some risk involved in investing. Just like when you plant a seed, you don't always know what will happen. The plant might not grow, or it might not produce any flowers or fruit. The same is true with investing. You might lose money on your investment. It's important to be aware of the risks before you invest any money.
Explain the difference between Saving vs Investing. Saving involves putting money ASIDE for a specific goal. Investing involves putting money INTO something with the expectation it will grow and you will earn money
ACTION: Demonstrate saving visually by showing the money in a piggy bank. Saving is important for short-term goals, like buying a new toy or saving for a vacation.
ACTION: Investing is important for long-term goals, such as retirement or saving for a child's college education.
Encourage curiosity and questions. This can help develop an inquiring mind and a desire to learn more.
ACTION: Ask your child what he/she wants to learn more about? Are there any products or toys your child has questions about? How can he/she learn more about these things?
Emphasize long term thinking. Investing is a long term strategy.
ACTION: Together, plant flower or vegetable seeds. Watch it grow over time. Investing is like planting a garden. You plant the seeds, water them, and care for them over time. Eventually, the plants grow and produce flowers or vegetables that you can enjoy. Investing is similar. Instead of planting seeds, you invest money in something that has the potential to grow in value over time, like a stock or a mutual fund. You need to be patient and care for your investment by monitoring it and making smart decisions.
