Investing may not be the first thing on a child’s mind, but introducing them to the concept early can have lifelong benefits. While financial jargon and complex concepts might seem daunting, making investing relatable and engaging can help children develop a solid foundation for future financial success. Here are six effective strategies to spark their interest in investing.
Make investing relatable and easy to understand
For kids, investing might be something they can’t quite grasp with a whole lot of odd words such as “dividends” or “Roth IRA.” Instead of bombarding them with financial lingo, start with the basics. The simplest way to explain investing is by showing them how money grows over time without doing more work. For example, if a kid invests $100 and earns $10 in interest, the next cycle of growth will have that additional $10, building upon their overall savings incrementally.
A visualization or an investment calculator may render the idea more tangible. Interactive online content on the internet and social media is also available that may enable children to understand finance concepts. YouTube vlogger Ariana Bribiesca of Malibu, California, began investing when she was 16 after watching content about the topic on YouTube for nearly a year. “I began with the help of YouTube,” she says. “I did about 10 months of research before I opened my brokerage account.” Involving children in browsing through learning materials on the sites they’re already visiting makes learning to invest easier.
Let kids invest in brands they love
One way to make investing exciting is by connecting it to a child’s interests. Riley Adams, a certified public accountant and founder of Young and the Invested, suggests helping kids invest in companies they already love. If a child enjoys shopping at Nike or using Snapchat, explain that they can become part-owners of these companies by buying stocks.
When children realize that their favorite brands are publicly traded, they may feel more invested in the financial world. Instead of simply being consumers, they begin to see how they can financially benefit from the companies they support. This approach creates a personal connection to investing and encourages long-term engagement. For instance, a child who invests in Disney stock may feel more involved when they visit a Disney theme park, seeing firsthand how businesses operate and generate revenue.
Additionally, parents can use real-life examples to demonstrate investment growth. Show them how a company’s stock value has changed over time and explain what factors contributed to those changes. This can help children develop a deeper understanding of how investments fluctuate and why making informed decisions is important.
Turn investing into a fun and interactive experience
Children are drawn to games and nature, and gamifying investing with a little competition may be more appealing. Gamification, or using game-like techniques in non-game settings, is a very powerful way of making investing fun. Children and parents can set up a challenge as to whose investment performs better over a set amount of time and give the winner a small reward.
Or children can learn about investing with virtual stock trading accounts before investing actual money. “I spent roughly two months practicing on the Stock Market Simulator software,“ says Bribiesca, who was given a virtual $10,000 piggy bank within the app. “I opened up my entire experience with my parents and had them watch YouTube videos with me so they’d get what I was learning,” she continues. These simulation lessons allow kids to experiment with investment strategies without paying any money.
Once the kids are ready to invest using real money, their parents can assist in opening an account to suit their needs. These can be a 529 education savings plan, a custodial brokerage account for general investing or a Roth IRA to begin saving early for retirement.
Encourage long-term investing habits
Forming sound money habits at an early age is the key to long-term achievement. Parents can encourage consistent investing by teaching children to set aside a small portion of their weekly allowance or earnings to invest. Even small sums can amount to a great deal after a while due to compound interest.
Additionally, being transparent with money can make the subject of money appear more normal. Parents do not discuss money with their children, but engaging them in money conversations can educate them. Bribiesca highlights that it is crucial to engage in such conversations: “Parents need to engage their children in money conversations and introduce them step by step to different subjects or sources.” Kids love to imitate their parents and emulate them when they notice that something is highly rewarding.
By opening up investing to them, linking it to things they are interested in, introducing interactive elements, and promoting normal financial habits, parents can get their children onto the road to financial literacy and success. Informing children about investing today may equip them with the skills to make good money decisions for the rest of their lives.
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