It is never too early to teach your kids how to be financially prepared and savvy. If they know how to save or invest correctly, they can be millionaires at age 21 or at least have solid financial habits on how to make it happen in the future. Below are 10 practices on how to teach investing to your kids today.
- Point out the difference between saving and investing.
Saving is good but investing is better. Children should learn how money can be used to make more money.
- Use simple language that they understand.
Begin with basic concepts like the difference between mutual funds and exchange traded funds. Keep it simple and do not overwhelm with information. The idea is to show them how some spending generate more income.
- Teach with stories.
You can share your personal saving and investing plan using stories. Focus on the benefits and long-term advantages of investing money.
- Know your children’s learning styles.
Children learn differently. The most powerful learning style is the one that they prefer. Some are visual learners while others are kinesthetic. Employ various techniques and methods to communicate so learning is fun for them.
- Game the market.
Give your small children play money portfolio and track the results. Playing through online simulations can create a space for you and your child to openly discuss the rules of investing.
- Use videogames.
There are tons of games that can teach your children about money. Go online and find colorful ones that can help them.
- Give your children some stocks.
A good way to teach kids investing is to buy them a portfolio with 10 stocks, with some shares dividend payers and others not. This approach will teach children about compounding and investment yield and highlight the importance of choosing the right companies to invest in.
- Teach them compound interest.
Money grows with compound interest. This is an important real-world lesson for children. Volatility is normal. Knowing this fact and investing through it will keep emotions in check when your kids are investing at an older age.