Communicated Content – If you’re into investing, you probably want to teach your kids about it as well. However, if you had to learn about investing on your own, you may not be entirely sure about the best way to do this. Teaching your children to invest is one of the best gifts that you can give them because it can be a tool for lifelong financial security. However, if you start reading to your children from The Wall Street Journal or the S&P 500 Index, their eyes are going to glaze over very quickly. Below are a few ways that you can make learning about investing engaging and fun.
The Basics
Good investing practices start with following personal finance tips and good money practices. Giving your child an allowance helps them learn about spending and saving. They can put money away in a piggy bank or in an actual savings account, where you can show them how the interest rate means their money grows a little bit. You can also explain that investing means money has the opportunity to grow a lot more.
Penny Stocks
Penny stocks can be a great way to introduce kids to investing because they can use a little of their own allowance and you don’t have to explain a great deal before getting started. You can sit down together and review a watch list that shows the best penny stocks to trade. Let them choose which among the stocks to watch that they want to put their money towards. While the volatility of penny stocks means that they usually don’t behave like typical stocks, this can be a fun hands-on activity whether they lose money or see a jump in profits.
Talking Stocks
Once you’ve grabbed their attention with penny stocks, you can start talking about some of the underlying facts about investing. They will have already seen their penny stock go down or up. You can explain that regular stocks do this as well albeit on a much larger scale and usually with far less volatility over the long term. Choose companies that your child is familiar with, such as gaming companies, and look at company investor relations pages.
Let your child choose a stock to buy some shares in or, if you don’t have the money or don’t want to spend any yet, you can do some paper trading with a demo account. This could be one way for your child to follow stocks while putting away a little money each week from their allowance that they can use to buy their first share. You can open a custodial account for them with an online broker that can help them get started.
Bonds and Other Investments
Of course, there’s more to investing than the stock market, and you can discuss that as well. You could give the child a gift of a savings bond or have a family member do so, which will help them better understand how this low-risk investment can still appreciate in value. Whether they have a real custodial account or are still just paper trading, you can also talk to them about mutual funds, exchange-traded funds, and other options.
