Monday, September 28, 2015, AM | Leave Comment
Teaching kids how to not just save their money but how to invest it wisely can set them up for a much more financially comfortable life. Most people begin to recognize the importance of investing when they enter adulthood and they begin to take financial planning more serious.
Unfortunately, investing is not a popular topic in primary school regardless of how important of a life skill it is.
Because most schools focus on the traditional subject areas and not on subjects like saving or investing, many leave high school and college with little knowledge of how to hold onto their money let alone how to expend money in a way that leads to profits.
If you want to instill your kids with investing skills early on, here are five fun ways to start teaching them savvy principles.
Teach By Example With Your Own Investment Portfolio
The best type of investment is one that requires little money upfront and that will generate you a steady stream of income.
How can you expect your children to get excited about investing if you are not practicing what you preach? Get them started young and start a side business that does not require a lot of attention but that does require a smart strategy and good investing skills.
If you buy a vending machine and have it supplied by a company like Pro Serve, a San Bernandino, CA vending machine service, you can easily get the kids involved by showing them the cost, deciding on inventory, assigning price points for reasonable profits, and choosing the best location.
When you show your children that investing requires research and thorough planning, they will understand it is being smart and strategic and not a risk-taking gambler.
Start Your Own Savings Contributions Matching Plan
Employers often offer their employees a benefit where they will match a specific percentage of what the employee contributes to their 401k as long as they stay with the company for a specified period of time.
As you know, both the employee and the employer benefit in different ways. You can start your own savings matching program with your child and explain the terms to them so that they are prepared to invest a portion of their paychecks when they start to work.
The contribution matching can be very simple and very effective in motivating kids to save. Be sure to have them work for what they earn.
Once it is time for payday, you can motivate them to put the money away instead of spending it by matching whatever goes into their savings account.
If they earn $20 for the week, match that $20 when they decide to deposit it into their savings. As they see the account grow, they will see how savings will pay off.
Have a Crash Course on Investing Stocks and Bonds
Your child might not be old enough to start trading stocks, but you are never too young to start learning.
Instead of just reading to your child out of a textbook, you should make the learning process a family activity. You can show your child your stocks, explain how much of the company you own, and highlight important investment terms they will come into contact with.
You can even buy your children bonds and show them the prime interest rate and how this is a low-risk option that offers smaller returns.
Try playing a game similar to the game of life with stock-related scenarios and you will drill the important information into their brains.
Creating a Business Plan
Kids may choose to invest into a business instead of investing into a stock. For the entrepreneurial child, the idea of starting a business may interest them more.
If you want to see if your child has what it takes to be a strategic partner, have them come up with the a small business idea and then start creating a real business plan.
You need to plan for funding, project profits, discuss marketing tactics, decide on pricing, and forecast future growth goals. This will help them see the risk and reward associated in a business investment.
Have Your Child Be Your Financial Advisor for a Day
If stocks and forex trades are more up your kid’s alley, why not have them be your financial adviser? After you have discussed the ins and the outs of the market, you can let them use what they learned by having them research stocks and then have them present their recommendations.
You may not actually invest your money, but you can track the stock to see how it performs and then track their success record.
Even adults do not know how to invest wisely. The best investments have a balance of risk and reward. You need to show your child that saving is important but that risk can payoff in some scenarios.
Try these ideas to equip your child with the skills that they need when they leave the house, and you will feel at ease that they are prepared to make smart financial decisions.
Rachelle Wilber is a freelance writer living in the San Diego, California area. She graduated from San Diego State University with her Bachelor’s Degree in Journalism and Media Studies. She tries to find an interest in all topics and themes, which prompts her writing. When she isn’t on her porch writing in the sun, you can find her shopping, at the beach, or at the gym. Follow her on twitter: @RachelleWilber