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A Parent's Guide to Teaching Kids Key Investing Concepts
It's never too soon to invest in a child’s future. Teaching kids solid financial habits is a gift that can pay off for the rest of their lives. Whether you have a young child or a teenager, explaining to your child the value of saving and investing money can better prepare them for independence, even if that's years away.
As soon as kids get their hands on pocket money, their first instinct may be to spend it! So before kids learn to invest, parents might begin by having a conversation with their children about saving.
Children Ages 3 to 5
A child as young as three years old can achieve a basic understanding of what it means to save. To get the conversation about saving started, parents might use a piggy bank to give their young children a visual picture of how money can be stored. To take it one step further, parents can teach the value of savings by letting their child set a goal to buy a special toy or treat, and once the child reaches their savings goal, they can reap the rewards. Not only does this reinforce good saving habits, but it also teaches a valuable lesson about working toward a goal.
Children Ages 6 to 12
At this age, kids can grasp concepts such as earning money and how to start planning ahead. As a parent, you might assign chores, like helping out in the yard or cleaning the house and pay your child a weekly allowance. By teaching your children the concept of earning, you can continue to reinforce the value of saving while also emphasizing the benefits of planning.
Teens and Young Adults
As your children become teens and young adults, they might have a job where they earn money and begin making financial decisions independently. Since they may be more tempted to spend and make larger purchases, helping them stay on track with saving money and setting future financial goals can be critical at this stage.
After setting up a foundation for savings skills, you can then introduce relatable concepts about investing. One great way to do this is to use real-life examples to help a child understand investing in a more tangible way. For instance, you might tell your child that investing can make their money grow, but it requires time and energy, similar to when you plant a flower. Saving can lead to investing, but you may want to discuss with children when to save and when to invest. One of the most significant differences between saving and investing comes down to risk.
Teaching your kids about investing may feel like a daunting task. However, you may find that the concepts you introduce compound over time, helping your kids to develop healthy money habits in the future.
For more information on how to teach kids about investing, access the full article here.
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