Being financially secure and responsible should be atop of the list of your priorities in the modern world. It has always been like that, to be fair, but in recent years it has been shown that a lot of things can shake up our economics in a great way. With that in mind, it’s important to understand how money works and how you can make it work for you. Because, quite frankly, having only one source of income nowadays, no matter how great, can be a risky business.
So, how do you make money other than by working? Well, by investing. Not to say investing isn’t work, it certainly is and it can be a very lucrative work if you make your career. However, if do decide on a 9 to 5, or a private business, investing on the side can be a great way for you to make some extra money. Unfortunately, because investing isn’t considered by many as ‘work’, a lot of people miss out on a lot of opportunities and a lot of money. Whether it’s fear of the unknown or just pure ignorance, people don’t give investing enough credit, nor do they teach their kids about the importance of investing.
Today, for those of you that are aware of the power of an investment, we’ve created a simple guide on how to teach your children about investing and have them be financially literate and responsible in the future. Without wasting any more of your time, because, ‘Time is money’ as they like to say on Wall Street, we present you with 5 tips on how to teach your children about investment.
1. Start with teaching them about savings
You’re most likely familiar with the ‘it’s never too late’ saying, however, ‘never too early’ should be a thing people say, too. This particularly applies to everything that has to do with the child’s well-being. Teaching your child to be responsible with money and other possessions is one of the most valuable lessons you’re going to teach them.
Start small and simple – with a piggy bank. You can start by having them pick out the piggy bank, which will be a fun step for them. You can go old school with just a regular piggy bank that has to be broken open for money to come out, but we’d recommend something slightly different. Have an easily accessible piggy bank, that’ll train their character, too. You can even have two different ones, one for saving and one for spending. You can do a lot here, it’s an easy and fun first step.
2. Introduce them to investing
Naturally, you’re not going to talk to your 4-year-old about ETF and BitCoin value fluctuations and what it depends on, they’re not going to understand any of that and you’ll just make them uninterested. What you need to do, is first differentiate the saving and investing. Explain to them in the simplest way possible the difference between the two, the risk and rewards of both and so on. You can even start small by introducing them to investing via loved.com where you would set up an investment account for them and from there you can learn together. You’d have control over the account until they become adults. When they become of age, they would take over, along with the knowledge and a solid foundation for future investments.
3. Tell stories
There is nothing as efficient as a good story. We all love them, regardless of age. However, they are most efficient when we’re little. Kids just adore stories. This can be an easy segue into the world of financials. You can talk about your plan for the future, your investments, both good and bad and so on. It’s important to make the child understand how much of an effect it can have on your life. You can also share some interesting stories about people who have profited a lot by investing, which could make your child even more interested in the financial aspect of life. It doesn’t necessarily have to be true, just interesting and informative enough for the child to listen to. However, avoid making it seem too much like a fairy tale. Children need to understand that these things don’t just happen and that it isn’t based on luck. A lot of knowledge goes into an investment and they need to be aware of that.
4. Teach them the way it fits them, not you
It’s probably easier for you to just sit down and tell the child your lesson for the day and be over with it. However, that’s not the point. You’re not a minimum wage worker that can’t wait to get home from work – you’re teaching your child. That being said, all the kids are different. Some learn by example, some by listening and some by viewing. You have to realize which of these is best suited for your child, otherwise, it’ll get bored and won’t learn anything. Try and use all sorts of different methods. Show them videos, tell stories, draw pictures or use your phone or a computer. Keep it versatile so the child doesn’t get bored.
5. Show them how it works through a game
We all like games, children especially. A great game that comes to everyone’s mind when it comes to financing is Monopoly. Monopoly can be a great, simple example of how investments and returns work. It’ll present them with the gist of it and a couple of bankruptcies will make them wiser with money and then you can move on to something slightly more reality-like.
There are a couple of great websites that have great games that depict the world of investing. They are specifically designed for children with the interface designed to suit their needs and pique their interest. Additionally, they are not some random-outcome games, a lot of effort has been put into them to make them as realistic as possible.
Later on, when their interest is peaked and they understand a bit more, it’s important to have them realise how and at what rate money actually grows, just to avoid the confusion. At that time you may talk to them about compound investments, dividends, the ‘Rule of 72’ and more. Take your time, don’t overwhelm them with information right away and you should be fine.