Teaching your kids to get into investing is a very smart thing to do: it increases awareness of money and finances, promotes accountability, and prevents the development of the dreaded instant gratification trait that so many seem to suffer from.
However, convincing your child to save and invest instead of spend and consume can be a difficult task. After all, we are animals of ” right now”, and children personify this trait more than anyone else.
So here are some tips to follow if you want to introduce your child to saving and investing!
First, Focus On Saving
“You have to learn to crawl before learning to walk”. Sound advice, and fortunately it can apply to many situations.
- talk to them about the difference been getting something good now, and getting something awesome later.
- talk to them about the difference been wants and needs.
- discuss the possibility of an allowance
- practice a budget for a future event, like a birthday or Christmas
These are concepts that we all know kids should understand, but somehow may escape our attention.
Visual Learning Is Key
Kids react and to – and remember – visual stimuli, so it’s useful to create a graph or chart that tracks their progress. Do you remember seeing this as a kid:
The red starts at the bottom of the thermometer and rises up to match milestones on its side. Once it reaches the top, you’ve reached your goal!
Creating a visual aid to help kids see their success is a great way of creating anticipation of completing a goal or task. So break out the sparkle glue and get creative!
Make It Fun
Create a game. If you have more than one child, a friendly game between siblings on who saves the most could be a good way of creating some competition. Of course, it could also go SUPER sideways, so use your judgement in deciding if your kids do well with competition!
Also, consider prizes and rewards. Kids need a little hit of dopamine after a challenging task to make the feel rewarded. Consider having a prize at the end of the month for reaching a predetermined goal. For example, every time a dividend payment reaches a new milestone ($10, $20, $30, etc.), have them spend that money on something fun!
Kids and investing may not mix intuitively, so the more fun the activity is, the more likely they’ll continue!
Buy What You Know
Trying to convince a child to invest in multiple sectors like consumer goods, textiles, energy, or healthcare is a lot like nailing Jello to a tree. But if you can show them what they are buying, it might make it easier.
Consider having a prize at the end of the month for reaching a predetermined goal.
Purchasing shares in a company that is well known to kids is a great tactic for improving understanding for your child. Disney, Coca-Cola, Hasbro, the Gap; these are all great examples of things that kids can touch, wear, watch, or listen to, AND invest in. These may not always be dividend aristocrat stocks, but it’s a great place to start!
(This advice isn’t just for kids and investing: I would extend it to adults and seasoned investors as well).
Books & Stories
There is no substitute for learning, and kids are in the best environment for soaking up new information every day.
These are some of the best books on the market for kids and parents. They can help teach you about the best ways to get your kids in saving and investing:
A professional finance expert, Gail Vaz-Oxlade will teach you everything your kids need to know about savings and finance. She believes that a healthy and balanced attitude towards money starts at a young age. Money-Smart Kids is a great read for any parent looking for some guidance on guiding their kids towards finance literacy.
Dave Ramsey, who I have mentioned previously, is one of my favourite businessmen. A graduate from the College of Business Administration at University of Tennessee, he has earned a solid reputation as one of Americas most trusted voices in finance; and he shares his wisdom in teaching kids in his works Smart Money, Smart Kids.
Made for kids (but perfect for parents), How To Turn $100 into $1,000,000 starts by teaching the reader how to earn their first $100. The story continues to explain how to turn that initial sum into $1,000,000 by thinking like a millionaire (of course, millionaires are people who save money, not spend it).
This book covers everything from asking for an allowance to getting a job to starting a business.
Also, it outlines the dangerous of having money, including spending sprees, Ponzi schemes, and spending more than you make.
Most people want their kids to have the best life possible, and knowledge is a fundamental part of that goal. It doesn’t have to be formal instruction, but people need to learn through experiences, travel, work, and friendships.
Starting your kid on the journey towards financial literacy at a young age is the right thing to do; they will be better prepared for their high earning years, especially for when the next market crash happens. They’ll be thankful for it in the moment, and in the future.
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