As featured in http://www.nerdwallet.com.
Begin talking with the kids about investing sooner rather than later.
Interestingly, many parents find it awkward to discuss stock investing, especially with their young children. Some adults don’t feel confident in their abilities to do research. What I’ve discovered is the discussion with young children actually helps less confident parents become better stock investors.
The conversation raises the bar for teacher-parents and the children willing to learn.
It’s a win-win.
There are several milestones to reach. The adventure begins with these simple steps to consider when it comes to engaging the children.
1). Build excitement – Creating passion around the investing process is important. Begin with a dialogue around the children’s brand loyalties (and they start at an early age). When I was young, I drove my parents crazy: I always “needed” the latest Mattel’s Hot Wheels car or Hasbro’s G.I. Joe action figure. I would only eat Kellogg’s Frosted Flakes, not the store brand.
So, what products are your kids passionate about?
Create short-term activities to build interest. Come up with a deadline for completion. For example, have the children begin and maintain journals of the products and services they like or use. Have them track the prices of those items over the internet or when you head to the stores. Remind the kids how the family is excited to hear about what they’re thinking and plan a family gathering around the topic.
One family created a big event around the journals. They had the children select their own notebooks and personalize them with money-related and other types of stickers. The kids paid for the supplies out of their allowances which created a stronger connection to the project.
2). Organize a family discussion – Once the children share their information at a family gathering, expand the discussion to include the products and services the family purchases or uses on a consistent basis, say at least twice a week. From soap to shoes, batteries to bandages – leave everything open for investigation. Nothing is off-limits. Now, you’re building a research list!
3). Watch your words – I’ll never forget when my uncle who was a specialist on the floor of the New York Stock Exchange, explained how I had the ability to own part of a large company. I was hooked. Wait: A poor kid from Brooklyn can own a piece of McDonald’s?
How does that happen?
The language used around stock investing is important to help the kids gain healthy perspective and a sense of pride in their selections and the investment experience, overall. The phrase “buying a stock,” is confusing when compared to “ownership in a company,” which in essence is what you’re trying to help the children embrace.
The concept of “stock” is nebulous for the younger ones to comprehend so it’s best to keep the language simple. Using words to connect ownership to investing creates a long-term investor mindset. You don’t want the children to focus solely on stock price movement; it’s best for them to strive to build discipline by focusing on the long-term value of a business – and all because you provided the perspective.
4). Begin with the concept of sales – It’s a good idea to introduce one simple concept before you begin specific stock-research homework. I’ve found kids relate well to the concept of sales. Whether you’re talking lemonade, girl-scout cookies, or school-related fund drives, children have an uncanny ability to understand that sales are positive and can lead to personal reward. It’s the same for a business. Generally, the more goods or services sold, the more favorable it is to the stock price over time.
You don’t need to work through these initial four steps alone. Partner with a financial advisor to facilitate the discussion or utilize books and other resources to jumpstart the process.
I recommend the book “Growing Money: A Complete Investing Guide for Kids,” by Gail Karlitz and Debbie Honig. Easy to understand and designed for children ages 8-12.
Want to engage the kids about several money concepts? There are 7 great money apps for kids reviewed by NerdWallet including my personal favorites – Virtual Piggy and Bee Farming.
You don’t need to wait (like I did) until you receive verbal cues from the kids to begin the engagement about investing.
You may never get them.
Even as early as age nine, you can begin a dialogue.
In the next report, I’ll take the investing discussion to the next plateau.
Until then, begin the conversations, start the journals, ignite the passions.
And the kids will never forget.