Knowing how to handle, save and invest money are some of the best skills you can give your children. Money smarts also happens to be the least taught skill that parents offer their children, and many times its because we didn’t learn about money from our parents either. Learning to invest money is a skill that needs to be taught and practiced, and learning can begin as young as grade school.
Learning to invest money can be fun for kids, giving them the chance to earn money using a few simple principles. The lessons they learn from investing can teach them about more than just making money, especially since investing requires patience, practice and the ability to analyze.
Tips to Teach Children about Investing
Give Children the Ability to Earn Money
The reasons for giving or withholding an allowance has been discussed for years, but if you are set on teaching your children about money and investing, you should definitely consider an allowance. Give your children the chance to earn money, through an allowance, but keep it skill based. Rather than just handing over a specific amount each week regardless of behavior or academic performance, make sure they understand and know that their allowance needs to be earned, in turn you can use their allowance as a teaching tool to explain how money is earned in life– as well as withheld.
Teach the Skill of Saving
Savings accounts for children are a lot more common today than most people know, but in most cases the children don’t even know they exist till they are fully grown and given full control of their parent’s life savings for them. Rather than just set up an account for your children, teach and walk them through the practice of saving money. If they don’t already have an account set up, take them along with you to the bank to do so once you have helped them save up a certain amount. If an account already exists, sit down with them to explain the account, the amount and the purpose for saving. Then work together with your children to earn, save and plan out their future spending.
Invest For and With Them
Depending on the age of your children, and your financial situation, begin to invest with or for them so that they can begin to grasp the idea of making money with money and financial lessons, such as inflation. If they are younger, purchase a share of a company that they can identify with. When you introduce them to saving accounts also introduce them to the stock market and their part in it. Give them the task of watching the growth or decline of their stock online. Older children are capable of investing their own, earned, money with some parental guidance. Help them open a custodial account and invest their money in a mutual fund, which has a lower level of risk.
Teaching our children about money and investing is not difficult, but it does take some willingness and time to sit down and talk about money. The more you discuss budgeting, earning and saving with your children, the more eager they are to learn about these skills which will benefit them for the rest of their lives.
What tips to teach children about investing do you have? Please share your ideas in the comments below so we can all try your ideas!