Kids learn pretty quickly that it takes money to buy things. The pace at which children develop financial literacy can be another matter, however. Most schools donâ€™t require financial literacy and those that do typically only offer classes at the high school level.
Thereâ€™s no need to rely on schools or wait until your kids are teenagers to start teaching them about money. The sooner your kids can pick up practical skills like budgeting and understanding the stock market, the better.
You donâ€™t need a finance degree to teach your kids about money and investing â€“ just have fun with it and keep things simple. Enthusiasm and patience yield good results. Below are five ways to teach your kids about money and investing.
Practice Real-Life Scenarios With Board Games
Did you play Monopoly or Life when you were a kid? Those games are true classics and a fun way to teach kids about real-life scenarios that involve money while having some family friendly competition.
You can also use the colorful paper money to teach your kids about how to keep a budget. Pretend you each have different jobs with varying salaries, such as a teacher or doctor, and a list of expenses to pay.
Play around with various scenarios like getting a promotion, paying for a hospital bill or adopting a puppy to demonstrate how changes in salary and expenses affect both disposable and discretionary income.
Introduce Your Kids to Stocks by Diving Into Their Interests
After getting the basics of cash management down, try out some simple lessons on investing. It doesnâ€™t have to be as complicated as you might imagine. You know your kids better than anyone, and honing in on their interests is one of the easiest ways to get them excited about the stock market.
Letâ€™s say your kids love pets. Start out by asking them to name some products and services that a pet owner typically pays for. Next, see if they can think of which types of businesses supply those products and services. Talk about how the success or failure of those businesses might affect pet owners.
Now that youâ€™ve captured their curiosity, explain what shareholders are how they can help companies grow and make new products when they purchase stock. Pick out a company or two, and discuss what those businesses do and why people might want to invest in them.
Have Fun With Charts and Predicting Price Movements
Once your kids are familiar with the concept of public companies and shareholders, teach them about the importance of monitoring investments. Explain how current events, company and competitor news and the state of the economy can affect prices and the number of people buying and selling stock.
Look at some charts together and show your kids how prices move up and down. Using visuals is a great way to tap into a more creative style of learning. You can even show them some of the investments you own. Take turns guessing which direction you think prices of a particular stock will move. Chart recent stock prices on paper, sketch your predictions of where you think prices will be by a certain date and come back to see which drawing is closest to the real chart.
Host a Family Friendly Competition
Once your kids have a grasp of how the stock market works, try hosting a family-friendly competition. Have each family member select a stock they want to follow and discuss what makes each one unique.
Agree on a time frame to monitor the performance of everyoneâ€™s stocks and have a prize for the person with the best returns. Throw in some consolation prizes for the runners up too, since everyone ultimately wins when they increase their investment knowledge.
Inspire Your Kids With True Stories About Financial Success
Itâ€™s exciting for kids to hear about young success stories. Although they may not know who Warren Buffett is, their ears should perk up when you tell them heâ€™s worth about $65 billion. Impress them even more by telling them Buffett was only 11 years old when he made his first stock purchase.
Brandon Fleisher, a bright youngster from Toronto, is another example that may inspire your kids. Brandon showed a keen interest in the stock market at the age of 13 and began trading fake stocks online as a hobby. His parents quickly discovered that his interests were more than just a hobby; he was quite good at picking stocks.
They were so impressed with Brandonâ€™s abilities they let him invest $48,000 of their savings. To their delight, Brandon more than tripled their money in two years to $147,000. Now he runs an investing website with students who share his passion for investing.
Stay Involved and Help Them Prepare for the Future
Donâ€™t forget to teach your children that investments carry risk. You can show them historical charts of past stock market corrections and the subsequent market recoveries. Share some of your own successes and failures too.
Help your kids understand the power of compounding returns and the benefits of long-term investing. The more financially prepared they are before they leave the nest, the more successful theyâ€™re likely to be.
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 Forbes, â€œThe Worldâ€™s Billionaires: #3 Warren Buffet,â€ Forbes, October 23, 2016.
 Radcliffe, Brent, â€œHow did Warren Buffett get started in business?â€ Investopedia, 2016.
 Gillespie, Patrick, â€œMeet the 17-year-old investor who tripled his money,â€ CNN Money, April 28, 2015.