When Should You Start Teaching Your Kids About Investing?

Investing is a great way to get your money to start working for you. Millions of people have benefited from the return that investing brings on their funds. Maybe you have been blessed with a positive investing experience, and are eager to tell your friends and family members how and why they should do the same.rnBut, when is the right time to get your kids in on the conversation? Finances are not something that is readily discussed by adults, and they certainly are not a conventional conversation to be had with your offspring. The investment talk with your kids can be almost as intimidating as discussing the facts of life.rnGetting your kids involved in your finances from a relatively early age can benefit them greatly later on. Okay, so you probably don’t want to ask your three year old to help you balance your check book or review your stock options. But kids that are old enough to have a good understanding of some basic addition and subtraction are probably ready to get involved. A mature child of about ten or twelve would be the minimum age at which to include them in your financial discussions. rnLet’s say that your kids already know about money matters. They get the whole “budget” thing, and they understand how cash is earned and how it should be spent responsibly. However, do they know about investing? If not, then should you teach them about it?rnThe simple answer to both of those questions is yes. Teaching your kids about investing now will give them the benefit of time, which is a key factor in successful investing.rnInvesting should be discussed in the preteen age years—around twelve or thirteen would be a good starting point. By this time your children should be mature enough to handle the situation. Start byrn1. Explaining to your child what the financial definitions of “risk” and “reward” are. Spend some time on the Internet with them and browse some financial glossaries, or head down to your local library to read up on the world of finance. Teach your children that “risk” is the chance that an investor’s piece of stock could lose some, if not all of its value. Likewise, inform them that “reward” is the percentage that an investor can gain over time. “Reward” may also be referred to as the return on investment, or ROI. It is also important that you point out to them that different kinds of stock have different levels of risk, and that stock markets are unpredictable, and at times, volatile.rn2. Involve your child when you evaluate your stocks. Explain what is happening to the stocks, and with which companies you have invested. Your child will be more eager to learn about money management if they think that you have shareholdings in a popular electronics company that manufactures smartphones, or video game companies. Show them a few different kinds of stocks, and how an investor does not, and should not, be limited to only one kind.rn3. Finally, to really put things into perspective for your kid, get them to pick a company that they would like to invest in. You know that weekly allowance that you pay your kid? Take a small portion of that and allow them to invest in two or three different kinds of bonds or stocks. This will allow them to gain experience and better understand a stock’s performance. rnBy teaching your kids how to employ effective financial tactics, you will be giving them the tools they will need to successfully manage their wealth in the future.