How to Teach Kids About Investing (Even If You’re Not an Expert)

While parenting and teaching may go hand it can be hectic and parents may miss out on some crucial topics or even avoid others, especially if they feel they are not experts in it. Investment is one of these crucial areas and a lack of knowledge among parents may lead them to overlook it.

Investing is among the sure ways to financial independence and wealth, making it logical to teach our kids about it. There are several things to learn about investment and this discussion will guide you on how to teach your young ones about it, even if you are not a pro.

Begin with the Basics

As with every lesson you impart to your kids, it is recommended to begin with the basics. Introduce the concept of investment, banking on their prior understanding of money. Explain how investments work and what to expect from their successful implementation.

You should help them differentiate between savings and investments, which are two terms that may be confusing to some. Savings involve keeping some money aside, ideally for a project or for a rainy day, and is mostly a short-term engagement.

On the other hand, investing involves putting money into a project that will help it grow and it is mainly a long-term engagement.

You should also teach your young ones about risk and reward and how they work. Let them understand how the more risk they take when buying into something, the higher the chance of excellent rewards.

The power of compounding is another subject to introduce your kids to as part of their orientation to investing.

Make the Lessons Fun and Interactive

Kids are easily distracted or bored, especially when being taught. You can change this by making the lessons more fun and interactive, which will help them have a better grasp of the financial topic.

As you teach your young ones about money growth, encourage their participation and ask them to contribute where they feel like it. Additionally, bring games into the lessons, which will sharpen their understanding. Use games like Monopoly, The Stock Exchange Game, Financial Football, and many more.

Books are great tools for teaching about finances and how to grow them. Get age-appropriate books for your children depending on their cognitive level and read together if possible.

Other tools that can make the teachings fun and boring include YouTube videos and money apps for kids.

Go for A Hands-On Approach

You may need to go all practical when teaching your kids about investing. Here, you can use real-life examples of money growth, something they can easily relate to. You can also take them out to experience the investment environment, courtesy of seminars and conferences for kids.

Pick a company that they might be interested in, like a video game company, and build a case study around it. Focus on its founding, reasons for establishment, and growth over the years. You then track the company’s periodic growth with your children, looking at its stock performance, and factors that may make its stock appreciate or dip.

Small Beginnings

When you are confident in their investment skills, you can start small to test their expertise. You can use fake money, like in the Monopoly game, and watch how they grow their finances. Introduce micro-investing apps, like Acorn and Stash, to older children who have a better understanding of stock trading.

Alternatively, you can sign them up for demo accounts offered by several online forex trading brokers. The demo accounts are lossless, meaning your children won’t lose any real money while demo trading. They can use these accounts to practice various trading strategies to improve their skills.

With noticeable improvement, you can bring them into the real thing. Start with small monies like $50, which you give them and let them invest in a preferred project. Keep tabs on their progress together, where you can pinpoint some mistakes, which are great learning points.

Use Simple Words to Teach Core Investment Concepts

Investment, and general financial terminologies can be pretty challenging and even intimidating to some kids. You step up your teaching game in such a scenario by using simple words and relatable situations to aid their comprehension.

For example, when talking about diversification, you can break it down to spreading their monies into various projects to take advantage of various potential outcomes and buffer risks. Always translate to simple words to make it easier for them.

Signing Off

Our kids deserve to learn various things from us for a better future. Investing is among the crucial things that we can teach them, to give an upper edge in wealth creation.

No need to worry if you are not a financial expert, you can still share the little you know about money and still make a huge impact on your children. Highlighted are tips to rely on when teaching your young ones about investing.

Key takeaways include starting with the basics of investment and making the lessons fun and interactive. Also, be simple and clear for proper comprehension.