Teaching Our Kids Investing: 4 Tactics to Try
There comes a time when your kids need to learn about money and what it represents. When it comes to teaching our children the importance of not just saving, but investing, we’ve got to approach it in the right way. What does it take to teach our children the value of investing?
Explaining the Relationship Between Risk and Reward
Rather than letting your kids jump onto an investment platform like Bitcoin Prime, It’s important for you to illustrate the relationship between risk and reward. You can point them towards stocks and bonds as a great example, as stocks have a wider variety of risks that could go up in value or go down, and when you’re looking at something like bonds this is low risk but also brings about a low return. Risk and reward are vital components to learn when it comes to investing and illustrating the relationship between stocks and bonds. It can be a difficult starting point, but this is why you can give your child some savings bonds as a birthday present or Christmas gift.
Playing Stocks at Home
There’s a variety of trading platforms out there, but there are also options where you can play the stock market like it’s a game without investing any real money. This might be a better way to get your child’s attention in the short term because they are going to be more engaged than you explaining stock markets to them.
Explaining It Simply
It can be a very difficult topic. This is where the lemonade stand is a very good example. To sell lemonade you need somebody to give you the money to purchase the ingredients and the stand. After setting it up and selling a few glasses, the money would need to be returned to the person that provided the money, which is the investor (usually mom or dad). This very simple approach can teach children how investing works. You can then replace the lemonade stand example with a company and explain this is how you buy shares- in a variety of “lemonade stands” on the market in the hope that you are going to make a profit in the future.
Teaching Them About Spending What They Can Afford to Lose
The stock market is something that goes up and down. The problem children have is they want things and they want them now. When it comes to teaching our children about investing, one of the best life lessons is about showing them that it’s about being patient. Your child can check a fake stock daily, but one of the best ways for you to show them the value of investing is to open up a cash savings account with a specific interest rate. If you give your child $5 pocket money a week and ask them to invest $1 into their account every week, it can help them see how much profit they would make based on the account’s interest.
It can be a complex topic, and it’s important to be age-appropriate, but we also need to remember that they don’t teach these things in school. So let’s do it ourselves.