When you start your first job or leave college, you’ll likely start contributing to a 401(k) or similar retirement account. But, as the best advice goes, it’s never too early to start investing.
But now you have kids, and you’re wondering, what if you gave that advice to your kids, even though they aren’t necessarily making money yet? well you can let your kids start investing before they earn any real income. This may pay off (both philosophically and literally) in the future as it can make your kids wise stewards of their money in adulthood.
But how do you do it? As it turns out, there are several ways to get your child up and running as quickly as possible.
Play games with money
All children love to play and schools use games to give important information to the minds of children. So why not do the same when it comes to investing?
For example, you can start with a basic computer or mobile device games that teach your kids how to add and deduct money, or you can pretend to shop with real coins. This is great for practicing their basic arithmetic and getting them used to adding and subtracting money.
As your kids get older, consider introducing them to games that require them to make investments. Again, computer or smartphone games are excellent for this. But you can also play the many money games that are suitable for children:
- money bag game
Alternatively, you can also create your own games with money. For example:
- Give your child a dollar. Then challenge them to a game by telling them you’ll give them $2 next Monday if they don’t spend their money within a week.
- Continue the game by giving your child more money to be more patient and see if they see the importance of investing naturally.
Learn the importance of saving
While it can be fun to play games, you should also give your children the importance of saving and not spend that much money. Sure, you can do this with some of the personal games mentioned above, but you can also teach them this lesson by pairing it with the things they want, like toys or movies.
Let’s say your child wants a new action figure or other toy from the store. However, they didn’t save enough money from birthdays or other sources to buy it.
Instead of buying the toy for your child, teach them the importance of saving by telling them they can buy it once they’ve saved enough money. You can then give them a small amount each week to watch their savings grow.
This provides two benefits at once: it teaches your kids about: savings and investments while also training them to be more patient.
If the item in question is particularly expensive, such as a new video game console, you can meet your kid in the middle by offering to pay half if they can save half the money they need. The details are up to you.
The bottom line is this: Teaching your kids about saving will help them understand the importance and usefulness of investing because it’s a more abstract concept to master.
Use illustrations to represent investment principles
Since investing can be a little difficult for many children to understand, especially in the younger years, consider using illustrations to show different investment principles in action.
During lectures, we teach adults to tell stories about money and investment principles using charts and tables. Unfortunately, these media are still a bit complicated for children. So instead you can create simple pictures, draw cartoon characters and make up stories where the characters are involved in investment situations.
If you’re not that much of an artist, you can children’s books who teach basic financial concepts – including the concepts inherent in investing! – for children of all ages. In addition, colorful illustrations can greatly distract your child’s interests to invest and not spend too much money.
Give children a fee – and advise them to invest
Practice makes perfect, and your child will have a hard time getting used to investing at a young age if they don’t have any money.
Therefore, the best thing you can do to get your child to start investing early is to give them a fee. For example, let’s say you have a list of chores that your kids have to do every day. Then, at the end of the week, give each child who has done their chores a small allowance (you can pay in cash, make a bank transfer, or text with GetWeave to get them their allowance every week).
Don’t stop there though. Advise every child to invest that money by giving it back to you. Then, at the end of another week, give them back the money plus interest. It shows your kids how investing works and the benefits of using investing to build money faster than would otherwise be possible.
With particularly smart kids, you can combine some of these exercises. For example, you can tell your kids to save for expensive toys. Then you can give them an allowance and offer them the investment opportunity mentioned above.
If your child really understands investing, they can reinvest their money in the “Parent Bank” and earn money faster to buy the toys they want. Use a Google Docs Spreadsheet to keep up with their growing savings.
Start them with a bank account
Around 13 or 14, your child may qualify for a junior bank account. Children’s bank accounts aren’t as flexible as adults’ ones, and they don’t have as many benefits. But many children’s savings accounts have decent interest rates and allow children or teens to grow their savings over time.
By getting your child started with a bank account as soon as possible, you will familiarize them with financial ideas and make them more comfortable with investing, understand inflationand more.
Technically, a savings account with a local bank is the first type of investment you can make as an individual. In addition, starting a savings account can help your child contribute to their college fund or other important expenses as they get older.
Guide them to make investments
As your children grow up, guide them in making their first investments in the stock market. They must be 18 to trade alone, but once they reach that age, you can offer advice such as:
- How to choose stocks they believe in?
- Whether it’s investing in real estate
- How to avoid putting all their money in one asset?
- How to keep calm with their investments when the market is fluctuating, etc.
Starting your kids with a stable investment experience is key to helping them enjoy it and keep investing long after they’ve left home. Show them smart blogs about finances, give them new learning resources and continue to guide them on their way to financial self-reliance.
Finally having your kids started investing involves developing their interest in money and teaching them good financial habits at an early age. If you can do both, chances are your kids will become smart and successful investors in adulthood. It’s just another way to set them up for success as their parents.
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