Begin by helping children understand one of the most important factors of investing, risk vs. reward: risk is the possibility that an investment loses some or all of its value, while reward is the gain that an investment earns over time. Start teaching them so that one day when you grow old they will be financial stable and that they will be the one caring for you when you get older…even if they don’t is okay because you have your retirement planned.
- Helping your child understand the markets will demystify the process of investing, making it feel more accessible to them when they’re older.
- Start by teaching them the basics of risk vs. reward, stocks and bonds, profits and losses.
- Show them what stocks you own and explain why you chose to invest in those companies; have them join you in keeping an eye on the stock price and company news.
- Once your child feels comfortable enough with the concepts, let them pick out a stock of a company they know or like; if you can afford to buy a few shares, then do so, if not, help them set up a model portfolio.
- When the child is older, encourage them to invest money they’ve saved in a mix of stocks, bonds, and a savings account; you can help manage their portfolio, while still allowing them to take the lead.
DON’T EVER UNDER-ESTIMATE YOUR CHILDREN
If you pick stocks with your children when they are young, they’ll get a sense of the market’s up-and-down cycles; this will prepare them for dealing with market fluctuations and help them make informed decisions when they grow up.
Letting Children Invest
When your child is older, you can provide a more in-depth explanation of stocks and other investments. Eventually, you want to let your children buy their own stocks. Your child may have enough cash diligently saved up in a savings account by the time he or she is interested in investing. Don’t put it all into a bond or the stock market, but invest a third in each and keep a third in savings. This will allow your child to compare the returns of different types of investments. You have two options if your child doesn’t have money to participate in the learning process. You can use your own cash to open a small brokerage account for your child to make investments or build a model portfolio of stocks that your child wants to buy someday. In the latter case, you will need to find innovative ways to maintain their interest. Allow your child to make real decisions and take real risks. Money may be lost but the purpose of the exercise is to familiarize them with investing and part of this process is learning that investments have advantages and disadvantages. Whatever the outcome, the experience of gaining and losing money will be valuable. (Investopedia).
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Before your kids start learning – you need to take the lead so that you can be a role model moving forward as a Mentor & Coach for your family. Like looking at the Pond and you can see so much opportunities out there under water – you can only see the potential when you dive into it. Call Sharon for FREE 3-Days course AND SHE BE MORE THEN GLAD to insert you in our classes next month at Surigao. Sharon Mobile number is – 09199104104.
Remember your decision to change and be educated financially is a critical impact to your Children generation and Growth.