If you’re an investor, you probably remember that specific time in your life when something—or someone—sparked your interest in making investments. You probably remember that first time and just how fascinating it was. As an adult, you likely realize that in many ways it’s still a remarkable endeavor, and you most likely want to pass on that interest to your own children. How do you go about doing it? How soon is too soon to teach your kids about investing? Here are some tips for you to consider.
With Investing, Time is Your Friend
One of the main reasons why you should start sooner rather than later with your kids is because whether you’re investing in the stock market or the real estate market, all it takes is time, and you’ll make some money. Consider, as Do Hard Money says, that 97% of five-year periods made money and 100% of 10-year periods made money. Of course, it can be difficult for us to think in five- or ten-year periods, but there are a number of reasons that we should think this way.
First of all, the stock market is a very complex animal. It definitely has its short-term mood swings. Second, when you consider all of the superstar companies in the world today, such as Samsung, Apple, Google, Amazon, and the like, one of the first things you should realize is that there’s no substitute for time when building a successful company. You can’t say you wouldn’t be better off if you hadn’t invested in one of these companies five or ten years ago.
Teaching Should Be Age-Appropriate
Here are some ways you can create some age-appropriate lessons for your child, regardless of whatever stage of childhood he or she might be in:
- Ages 3–5: At this stage, you should impress upon the child that there’s absolutely nothing in this world that a person can have instantly. Sometimes people have to put off buying things because they don’t have the money.
- Ages 5–8: At this age, you should teach a child that money is earned and not simply given.
- Ages 9–11: Teach them about setting and keeping a budget.
- Ages 11–15: You should educate your children on how saving money can help them earn interest.
- Ages 16 and up: At this age, you should teach them that credit cards aren’t free and educate them on everything they need to know about college tuition and student loan possibilities.
Investing in Their Language
Remember to keep it simple when explaining investing terms. You can start with the piggy bank principle for savings, and then when it comes time to explain investing, you could simply say that it’s a way to turn your money into more money over time. You could even play a game with them to show them how the stock market works, like this one from the SIFMA Foundation.
If you follow these principles, it will be a good start for piquing your child’s interest in investing. It will also go a long way toward helping them to understand how important saving really is.