In the first three trading days of the new year the stock market went far enough and fast enough to have caused news alerts on phones and shouting television heads. So why would you want to expose your children to one of these?
For many parents, this is not a rhetorical question. Kids talk about investing – from interception on you, from relatives, from reading, from friends – and they want to. You may not know much about the markets though. And even if you do, you’re probably not sure where to start and what to share.
So you’re six steps to get started:
First, do not start in the middle. If your children have never managed money before, give them practice with some basic elements first. Start with compensation – and the fundamentals of saving, spending, and giving. Introduce them to some of the family budget entries. Food is a good starting point.
Anyway, however, say yes to invest if your offspring already includes the fundamentals of money. Their curiosity on the markets is probably not greed, and is good. Gordon Gekko aside, their desire for trade often reflects a deep curiosity about how money works and how people do more. As with any age-appropriate interest, we must encourage it in the best possible ways. (And though they say they want to trade stocks to become rich, it’s an opportunity to drive other family discussion paths.)
Secondly, while there are many simulation games, let them use real money to invest in individual actions if you can afford it. You can set up accounts at any online brokerage company that does not have a minimum balance, and $ 50 or $ 100 may be sufficient for a share of shares.
Investing in shares is learning to tolerate the risk; Without a little bit of courage, we can never earn the stock of returns they can provide on the long range. Having a 20 percent or 30 percent reduction in the title in a short period of time, such as Apple and Disney over the last few months, is a good time for children to focus on diversifying their investments.
Our goal here, when it is not obvious, is that when they are 22, they will have learned that investing in individual actions is actually gambling. They should put their large savings into low-cost investment funds investing in thousands of shares at one time.
Third, keep score with your kids. Bill Dwight, founder of the FamZoo allowance application, believes that older children are ready to invest in common index funds that pose entire stock market segments, as boring as they may be. I think kids should invest in individual stocks first of all because that’s what excites them (and will allow them to experience leaks of decent size, perhaps).
But we agree on one thing: parents should provide a point of reference so that children know how they make their investments. Sure, Apple and Disney have lost value, but how do they compare with other stocks in an index like the S & P 500?
Joline Godfrey, who recommends wealth families through her work at the Independent Means consulting firm, suggests a fourth approach: children can collaborate with others who share their interests. Maybe your brothers and cousins may have an investment club, or your child can start one at school. The value comes from being able to share ideas, discuss the importance of the facts they know about companies and then vote for the best moves to do.
Fifth, use the money for something important. Mr. Dwight insisted on creating individual Roth retirement accounts for his children at the time they started earning the real taxable income that is needed prior to starting that type of account. If you do, do as you did and show your children how much money could grow to 5 percent a year over 50 years. This should make them excite.
Finally, here’s a reading for kids who want to learn more. “The Money Handbook for Money,” by Kara McGuire, provides an excellent overview of a variety of issues of money. Nan J. Morrison, president and CEO of the Council for Economic Education, believes that older teenagers are ready for Burton G. Malkiel’s classic (and recently upgraded) “A Random Walk Down Wall Street”.
And a last resort for teenagers who want Frappuccino who want to deepen one security. Karen Blumenthal’s “Great Expectations,” tells the story of a year in Starbucks’s life. It should give young readers