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How to Teach Your Kids About Investing

It's never too early to learn about saving and spending money wisely. Especially when it comes to investing - the sooner you start, the better.

Lori Maresky
November 28th, 2021

One of the most valuable gifts a child could receive is a financial education. Unfortunately, however, most youngsters are deprived of a financial education as the majority ofschools in North America rarely teach financial literacy.

Just as adults have financial mentors, children need role models too. It is therefore up to parents to ensure their children are on track for financial prosperity. Here are some steps to have financial discussions with your kids:

1. Teach them the value of earning and saving

Any discussion of investing begins with the concept of saving. One of the best ways to illustrate the purpose of saving money is through teaching delayed gratification. It is a way of telling children “if you wait now, you’ll be happier later.”

Ask your child about what is exciting and important to them. It could be a new toy, a trip to Disneyland, or the puppy they won’t stop asking you about. Then, whether through a savings account or a piggy bank, you can encourage them to save up money for these goals. This helps them understand the value of putting money away now to reach a goal later. By creating discussions around saving money early in your child’s life, you can help foster a framework for responsible financial activity in adulthood.

2. Help your children understand investing

Simply put, investing is using the money you have to make more money. Explain to your kids that when you invest, you multiply your money’s capacity so that you can maximize your wealth.

The best way to demonstrate the power of investing is to show your kids how money increases exponentially over time. Usually, kids need visual aids, such as using actual coins to make a real-life picture of money. We can show them that even though today this one little coin might not be worth a lot of money, if it doubles every day it will eventually turn into a lot of money.

3. Introduce stocks through brands they’re familiar with

Explain to your children that one way of investing money is by putting it into stocks, something that represents ownership over a company. If you buy a share of a stock, you own a very small percentage of that company.

It’s a good idea to start the discussion by bringing in companies they are already familiar with, like Apple, Disney, Cartoon Network, or Nintendo.Encourage your children to research the companies to understand what they do. Together you can look at their performance from the past and discuss the many ways it might change in the future. Compare their prices today to what they were worth one or five years ago. Have they been volatile? Ask your child how they would feel about owning the stock if the price fell? This will also teach them that just because they like a certain company, it does not always mean it’s a good investment.

Make sure to show your children the power of investing with a small sum first. This will give them the freedom to make mistakes and learn from them without it costing a large amount.

4. Use computer games to teach kids about stocks

Children love computer games, and gamification is an enjoyable way to simulate a real-life stock market. How The Market Works is a free virtual stock market simulation that allows students to practice investing before using real money. Fantasy Stock Exchange or Stock Market Game are another two platforms and simulation games that allow kids to practice and learn about investing while playing.

5. Education with the help of digital tools

  • Technological tools have the potential to be a catalyst for financial education, particularly among young people, who are keen users of smartphones and applications. Here are some apps you can consider showing your kids to improve their financial literacy.Greenlight unlocks the world of investing for kids, with parent approval on every trade. Kids of any age can research, buy and sell stocks — including fractional shares — as well as exchange-traded funds.
  • Fam Zoo is a prepaid card for families and a hands-on financial education app for kids of all ages — preschool through college.
  • Teen VC is a digital education platform where teenagers can learn about Venture Capital and entrepreneurship.

6. Get them started on their own stock portfolio

Eventually, the time will come when you feel your child is ready to own real stocks. Together, you can buy one share from companies that your child knows. Together, you can follow the stock on a regular basis.

Again, you can turn to apps here to make the process more engaging for younger audiences. Stockpile is a platform that allows you to buy a gift card for your kid which allows them to buy whole or fractional shares of stock from a choice of multiple companies.

To Wrap Up

At the end of the day, your child most likely will not be the next Warren Buffet (as neither are most adults). But that is totally okay. By starting an ongoing financial conversation early on in life, we can prepare children for better financial decisions in the future and allow them to reach their full potential.

One of the best ways to get your kids interested in finance is to involve them in your own. When you’re looking into how your investments are performing or managing your assets, let them in on the process. We’re not saying you need to open a Vyzer account separately for your children, but while you’re managing your portfolio, let them have a look around, too, to get them used to the lingo and visuals of the finance world so that they’re confident enough to do it themselves one day.