How To Turn Your Kids Into Junior Investors

With rising inflation through the years, achieving financial independence has become an even more challenging goal for some people. This is why it has become more imperative to learn the basics of personal finance and have a firm grasp of saving and investing as early as possible.

But how young is too young? Given that the types of deposit accounts, investment tools, and financial literacy are not often covered in school, it has become parents’ responsibility to pick up the slack and start exposing their children early to these topics whenever possible.

Children learn by observing and imitating the behaviour of the adults around them, primarily through their parents.

Good thing, according to reputable providers of investment plans in the UAE, parents can help their children cultivate an interest in and understanding of basic finance through informal discussions or chats at home. Also, by studying your finances or making your own investments, you’ll have first-hand knowledge which you can use to help your kids understand what it means to invest and become financially independent for a better future.

Saving vs Investing

Explain the difference between saving and investing before going into anything else. Saving is an easier topic to explain with a bank account. But what about investment?

Given your child’s age, you will need to simplify your explanation. You can refer to investments as a way of using money to make more money. Around their teenage years, you can teach them about stocks, risks, and interest rates.

Pique Your Children’s Interest With Added Interest

Saving is a crucial component of money management. Teach your kids about the importance of having a savings account before going into investments.

Show your kids how saving money can earn them a bit more with a traditional savings account. Opening a savings account in your local bank is one way to teach your little tots about what interest is and how patience can help them earn more.

Saving accounts often come with a bankbook. By letting them check their bankbooks, they can see their savings grow. There are also apps that you can use to show your kids their growing funds.

If you feel that the interest rates are too low to generate any interest from your youngsters, you can spice up and drive home your point  by increasing the interest they receive on your own. You can offer an additional 5 percent interest per month that you’ll add to their savings account personally to drive the message home.

Use Stories

Avoid too much technical jargon as much as possible when trying to explain what investments are. If you use jargon, you run the risk of boring them and turning the learning experience into a chore.

Use brands or names of companies that they recognise and love in your stories. Explain to them that buying stocks from, say, McDonalds or Nike, allows them to become a partial owner of these brands or companies.

You can, of course, use your own experiences to teach them about saving and investing.

For instance, you can tell them a story about the time you chose to have an item (e.g. a bicycle) repaired instead of buying a replacement when you were still a kid. Or you can encourage them to increase whatever amount they have saved up by limiting their purchases of their favourite sweets or confectionery from the supermarket.

By providing examples of the rewards of delayed gratification, you can show them that any money saved can be allocated for more important purchases later on.

Turn It Into A Game

Make the experience of investing more fun and exciting by turning it into a game. There are apps that let users invest with play money. With this play money, they can build a portfolio of investments that they can track over time.

Use simulation apps to teach your kids about different investment tools, investing rules, and strategies. With these apps, they can learn about investment without worrying about losing real money.

Buy A Few Stocks

If you have the budget for it, you can also teach your kids about the stock market by buying real stocks. Allow them to choose about ten companies where they want to buy the stock from. Create a small stock portfolio by buying one stock from each of the companies that they’ve listed.

Given their age, expect them to buy stock from mega brands such as Walt Disney or Coca-Cola. Track the performance of their stock using apps or by reading news reports online. You can also use this opportunity to teach your kids about compound interest, yield, and even investing fees.

Depending on how their stock performs on the market, this may also be an appropriate time to teach them how to find and invest in winning stocks.

The world of saving and investing does not have to be daunting for your kids. With these tips, you are slowly teaching them the financial literacy skills that they’ll need when they become adults.

By teaching them about investments at a young age, you’re also giving them a head start in building a savings account they can use in the future.