If you've followed our blog for very long you know that we firmly believe it’s never too early to begin teaching children the fundamentals of financial literacy. It’s also a great idea to teach them about investing and the best way for them to learn is practically—by doing. The earlier your children learn about investing, the more financially stable they are likely to be.
When you’re ready to venture down the path of teaching your children about investing, keep it simple. Start off with the basic concepts of saving and financial goals.
Talk to your children about the risks and rewards of investing. There is always going to be a risk to investing and generally speaking, the higher the potential reward, the higher the risk of losing money.
Let your children test things out before they actually purchase any stock. Teach them how to follow the performance of a stock or two in the newspaper or online.
There are several great websites available to teach children about investing in the stock market that also provide the opportunity for children to invest.
One Share – A fun, easy, and affordable way for everyone to give shares of real stock.
Give a Share – Specialize in selling real one-share ownership in over 100 of the world's most beloved companies.
ShareBuilder - Offers a single-stock plan for $6.95 per month
BuyAndHold - Allows you to purchase two stocks for $6.99 a month and offers unlimited investing for $14.99 a month.
The National Association of Investors Corp. (NAIC) - Has a stock purchase program that lets you buy a small number of shares in quality companies.
Since kids and teens under the age of eighteen cannot acquire investments directly, you’ll need to set up a custodial account under the Uniform Gifts to Minors Act or Uniform Transfer to Minors Act, depending on state laws. The process is quite easy—you just fill out a form with the child’s name and Social Security number and the name of the custodian. Once the stock has been purchased, you’ll want to work out an informal agreement with your child regarding its management, etc.
Baseball cards, Pokémon, and Beanie Baby collections are a thing of the past. Nowadays, kids are investing in stocks in record numbers. Teaching your kids about investing at an early age will give them financial skills they can use well beyond their childhood years.
FamilyMint.com provides a fun and educational way for children, with the help of their parents, to manage money and build financial literacy. It's easy and intuitive award-winning online money management application has helped thousands of parents raise money-smart kids by teaching them about financial goal setting, and forming the types of financial habits and behaviors that will lead to financial success.
Check out FamilyMint.com and invest in your child’s future financial literacy and entrepreneurial success.
Tips for first-time investments
- Encourage your children to select companies they are familiar with (i.e. Coke, Disney, McDonald’s, Build-a-Bear, Starbucks, Nike, The Gap, etc.). It makes the process more personalized for your children.
- Suggest that your children select industries they are interested in (i.e. software, clothing, jewelry, sports, restaurants, etc.).
- Have your children select several companies (even if they only invest one share in each). This will give your kids the opportunity to observe balance and diversification.
- Look at/buy a slow-growing, high-dividend stock. This will generally guarantee some money for your children's future.
- Also consider buying a stock that has significant upside potential (even those with some risks).
- Avoid high risk stocks. While your children need to learn the ups and downs of the market, they shouldn't take too many risks.
- Involve your children as much as possible in their portfolios.
- Look into acquiring the actual, printed stock certificate that you can give to give to your child (they make fun and interesting gifts).
- Check out teen investment resources: The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of ; I'm A Shareholder Kit: The Basics About Stocks - For Kids/Teens