It is important to get kids interested in all thing’s wealth management as early as possible, and some say even at age three you can start teaching children the basics of money.
When it comes to the specific topic of investing for the future, when does it make sense to introduce the topic of stocks and investing in the market? For most kids, by the first grade they have developed specific interests that can capture not only their attention, but they will recall many of the intricacies of their passions, be it art, sports, or music.
One very tangible way to introduce the concept of investing in stocks for the long term is to find public companies that produce the things they enjoy. For example, if your daughter or son loves the Spider Man action figures or movies, you can share that they can own a little bit of Spidey by investing in the company that owns Spider Man, marvel ticker symbol MRV and explain that this is the company that created the character and by investing now in it, they can possibly make money over time in addition to learning more about their favorite character.
At any budget these days, fractional shares make it possible invest in your child’s passions. By owning actual shares of a company, many lessons can be shared. For example, you would be teaching them about the capital markets and building a business at the same time by telling the story that someone thought of Spider Man, then drew the figure, then created the comics and built a business around this form of entertainment and coupled with other comics and entertainment, the enterprise was sufficient enough to go public.
By periodically reviewing the companies’ new offerings, changes and of course stock price, it can be a regular topic of conversation. For example, when a new movie is announced that includes your child’s favorite human spider, you can debate whether the film will make an impact on the stock price. Conversely, if the movie does poorly at the box office, will the stock price take a temporary dive giving an opportunity to buy more on the cheap? When combined with the tactile impact of a piggy bank, it can be come fun and literal to teach investing.
The value of long-term investing being taught at a very young age, and discussed regularly can be critical in a child’s financial education, especially since most states do not offer any formal financial literacy classes in school curriculum.
As your child gets older, more sophisticated topics such as individual stock investing versus mutual fund or ETFs and indexes can all be explained. By making it fun, relevant and tangible today, however, builds an important foundation to build on for their financial future.
Related: Three Absolute Investing Rules