How to teach your kids about investing
Saving & Investing | Tuesday, April 11th, 2017
Children are quick at learning new things. Give them something educational to watch or read, and it is likely that they will surprise you with a trivia that is entirely new to you.
Thus, if children can learn seemingly complex concepts at an early age, teaching them about investing will be no different. But how? Below are some tips.
Start them early
In investing, the earlier you start is always better. The same thing applies with teaching your children about investing. Start out with simple concepts that will be easy for them to understand.
For example, we all know that children can be quite impatient. If they want something, they want to get it right away. But if you teach them to work for and save up for things that they really want, you will not only teach them the value of delayed gratification, but you will also teach them how to invest for the long term.
Start early, start simple, and you will be able to teach them more complex concepts as they mature.
Find out what interests them
Children will get bored listening to you talk about how to grow their wealth. Therefore, the key is to align your lessons with things that interest them like games.
The game of Monopoly, for example, can be a fun way for them to learn some of the concepts of investing in real estate and growing the value of their assets. They are not learning about investing per se, but the foundation is already there in an enjoyable and exciting form.
Each child will have their own learning style, so it is important that your recognize it and adapt your approach accordingly.
Go beyond stocks
As long as your children already understand the basic concepts of investing, then they can apply most of these to various forms of investment. That is why it is also a good idea to teach your children about investing in bonds and real estate even if stocks are usually more popular and more visible than the other two.
Going beyond stocks will help them better understand their different investment options, as well as the pros and cons of each option. As an example, while stocks are highly liquid, real estate may be better at providing passive income in the form of rent. Also, while bonds are relatively the safest form of investment compared to stocks and real estate, the latter two offer potentially better returns, with real estate giving the best possible return among the three.
You can also teach them that they do not have to actually buy a property to invest in real estate. Real Estate Investment Trusts (REITs) allow them to own a share of a portfolio of properties, making their real estate investment more liquid and more diverse.
Concepts about liquidity, risk, diversification, and returns can be difficult to teach in one go, but when you teach these to your children gradually, clearly, and in an engaging way, there is no reason for them not to understand these concepts.
Kenneth T. writes for The Investor, a real estate blog with a passion for real estate investments and provides real estate investors with insights on the most pertinent issues in the market to help support their investment decisions, wherever they are in the world.