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Help Your Child Invest Their Money! Investing for Children.

Investing for childrenInvesting can be child’s play. A little wisdom now can lead to long-term gains for your kid’s future. Investing for children is important for a secure future!

Under age 9...As soon as your child grasps the concept of a dollar, start talking about saving and delayed gratification.

1. Implement a weekly allowance. While some parents use it as a reward for completing chores around the house, it can also be a teaching tool to show that earning money is a separate and important skill.

2. Help kids create a simple budget. Explain the benefits of putting money aside for toys, ice cream outings, or other things Mom and Dad usually pay for.

Ages 9-12…Tweens are mature enough to appreciate the concept of using money to make money.

1. Once your child has saved $100 from his allowance, take him to the bank to open a savings account. Allow him to fill out the paperwork so he gets comfortable interacting with financial institutions. Yes, he will be investing in financial products that will earn much more interest than a simple savings account, but that comes later. First he must learn how “banks work”.

2. Consider gifting your child one share of a publicly traded company that he likes, such as Walt Disney, Microsoft, or Coca-Cola. (Share prices range between $30 and $70. Show him how to monitor the stock’s price online.

Ages 13-15…Teens are ready to grasp more complex financial lessons and may ask if investing is risky. While there’s no guarantee stocks will increase in value, over the past ten years the stock market as a whole has appreciated 2 %; in the past 20 years, four%. Investing is also one of the best way to beat inflation.

1. When your teen has at least $100 that is not earmarked for something else, open a custodial brokerage account and invest the money in an S & P 500 index fund. Buying this sort of mutual fund limits risk (you’re investing in a diversified basket of holdings). Review the monthly account statement with your teen.

2. Evaluate one of your own investment portfolios together. If you’ve been saving for your teen’s education for example, share the account so she can see the choices you’ve made and how your money has grown. It also helps her understand how much you’ve saved for her college years.

Ages 16-18…Let your teen manage her portfolio. It’s okay if she makes mistakes–the point is for her to get comfortable so she knows what to do when she’s eligible to contribute to a retirement account.

1…Arrange a meeting between your teen and a grandparent, friend or colleague who is knowledgeable about the market. Ask that “expert” if he would be willing to mentor your teen and touch base semi-regularly about her strategy.

2…Encourage your teen to invest in one or two companies or mutual funds. She should research potential investments online–your brokerage firm may even offer free tools.

Be a good parent when it comes to teaching your children how to handle money. With good training and smart thinking, they will grow up wealthy, and may even be a terrific “cheapskate” just like you and me!

Now let’s recommend some great links to help you teach your youth how to invest their money:

Oneshare.com . Purchase one share of a company for your kid and he’ll receive a framed stock certificate and starter kit.

Orangekids.com . Planet Orange, ING Directs”s interactive, space-themed game, teaches kids in grades one through six how to earn, spend, save and invest. GREAT FUN, even for us old grown-ups!

Weseed.com . Kids can create virtual stock portfolios and track the real market’s returns.  This one is for your teens.

Investopedia.com . From market basics to sophisticated strategies used by day traders, this comprehensive site offers tutorials, definitions and news. Great fun for youth AND adults!

And a terrific, solid resource is always Schwabmoneywise.com . Topics include saving, credit cards and investing, plus definitions of terms such as stocks, bonds, and exchange-traded funds. Charles Schwab  has been an excellent mentor for many years. Step into his classroom and get yourself (and your child) money-wise!!

 

children saving money

Special thanks to Family Circle magazine for some of the ideas presented in this blog post.

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