Teaching your teenagers or younger children about money isn’t always just about spending and savings, in fact teaching them how and why to invest can help them have a financially healthy life. The sooner they learn the basics the better the results could be in the long run! We at YounGo Money have put out a guide to help teaching financial investment to children, focusing on the hows and whys.
What should my children know before learning about investment?
First of all, as children start gaining a better understanding of money and other financial ideas, it’s a good idea to introduce them to financial investment and provide them with the knowledge and skills they’ll need as adults. Of course, children age at various speeds, so it may take some time for them to be ready to grasp topics like portfolio creation and asset allocation.
On the other hand, the fundamentals of investment, can be taught to children as early as kindergarten. Because money is rarely taught in schools, it is up to parents to ensure that their children learn the fundamentals of investment. Fortunately, you don’t need bitcoin or hedge funds to understand how to invest. And you don’t have to be an expert to teach your children. Here are some simple strategies to help you teach your kids about investment.
Make sure your children understand the value of money and how having a strong financial support system will benefit them in the future. Before teaching the basics of investments it’s best to understand the basics of finance such as spending and saving- you can read more about it in here.
What is Financial Investment?
Investing is nothing more than the act of spending money in the hopes of making more money. Teenagers might already have their own bank account so it is easier to introduce them the idea of investing, essentially explain to them that they are already investing by placing money into their savings account, which pays them interest. Explain that there are other methods of investing their money: buying stocks for instance.
How do I explain stock and financial investment to children?
Depending on the age group your child is part of you could explain to them stocks in relation to something they are passionate about:
“You know something they like ? They were all made by a company called name of company. This company needs money to make their products. One way they get money is by selling stock. When someone buys their stock, it means they own a little piece of the Company.”
What are stocks?
When your child asks what are stocks you can explain that they are a piece of paper (real or virtual) that represents ownership of a certain percentage of the company.
For instance, if a firm has 100 total shares of stock, each share represents one percent of the company. Your child owns 10% of the corporation if he or she owns 10 shares. Companies sell shares to raise funds to purchase supplies, develop new goods, build new factories, or pay their staff. Large corporations may hold billions of dollars in shares. The stock market is then used by people to buy and sell stocks.
People acquire stock in companies to try to make more money in the same way they put money in their savings accounts. They are allowing the firms to borrow their funds in exchange for interest payments. If the company works well, the stock price rises, resulting in profit for stockholders. People who own stock in a company lose money if it does not perform adequately.
Why is it important for children to learn about investments?
Sometimes explaining investments can be hard to understand even for adults, however it is important to explain to your children especially in the always-changing world we live in; where more and more people decide to invest their money in stocks, properties or crypto currencies. It is not necessary for children to understand the various type of investments, however, it is important for them to be aware that there are different ways to invest their money when they get older.
Learn investment by playing
Your child will not entirely comprehend all of this, which is understandable. This is merely a primer on the concepts and phrases associated with investing. It is up to you to decide if you’d like your child to learn more about it in depth- for instance you may want to associate products that they enjoy with the name of the companies and mention to them that they could acquire stocks from these firms. This makes people think about the firms that make the items they use, as well as the reasons why these companies might thrive or fail, and what that might mean for the stock price.
Another way to incorporate investing could be around property investment and there is a children’s (and adults’) favourite board game: Monopoly! Monopoly, as a real estate trading game, is essentially a simplified version of some of the real-world strategies that investors employ in the market. You can assist them comprehend that some of these methods are what investors would apply in a real-life situation once they’ve gotten a handle on the game’s ins and outs. Monopoly is possibly one of the best ways to keep kids interested when explaining investing to them. From spreading your assets across the board and investing time and effort as well as money, to keeping an eye on cash flow and paying attention to prices.