How to Inspire Kids to Invest

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How to Inspire Kids to Invest

Not every middle schooler who shows an interest in the stock market will end up pursuing a career in financial planning like I have.  (Although if you have a student in your family considering this pathway, I’d be happy to share my experience studying financial planning at The University of Georgia).

While I finished college only two years ago, I’ve been an investor for nearly half of my life – since I was 12 years old. In my “long-standing” investing career, I have learned a lot – with some lessons being harder than others.  I hope that my story and the tips below are helpful for your kids who are curious about investing the way I was in middle school.  

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Like many impressionable pre-teens, my interest in investing started because I heard older family members talking about it.  My uncle and cousin were always discussing money they were making through something they termed “investing.”

While I had mere pocket change at the time, hearing those discussions inspired me to put my allowance into Bank of America and Microsoft stocks. I invested in Bank of America because I always heard my uncle talk about it, and I invested in Microsoft because I had an Xbox that I loved.

I did not understand how the stock market worked, so after not seeing profits in the first month I hastily sold my Bank of America stock, but kept the Microsoft holding. Watching my limited allowance funds evaporate was painful at the time, but it’s part of what pushed me toward a career in financial planning – so I could learn how to make better investing decisions.

Looking back now, I see how crucial it is for parents to help their children understand how the market works before letting them take the plunge with their own allowance money.  Otherwise, the learning opportunity is lost and the investment is truly a waste.  Here are my top 3 tips:

Be Patient
While not the strong suit of most pre-teens, patience is one of the keys to success in the stock market – which your child needs to understand is a marathon, not a sprint. It can be hard for kids to comprehend, but explaining it the way you explain Santa Claus can be an easy analogy. Just like how they behave all year long to get presents one day in December, you invest in stocks faithfully over a long period with the promise of a payoff down the road.

Although preteens/teens are a bit removed from Santa, the concept is still easily grasped – that good things come to those who wait. For kids craving more specifics, Investopedia offers some great language (check out this page for starters).

Focus on Fundamentals
First, make sure your children understand the difference between saving and investing as a fundamental concept.  I wish I’d known about BizKids when I was starting my investing journey!

From there, discuss the reasons it makes sense to invest in one stock vs. another.  Have your kids conduct their own research by scanning the financial press, come back to you with a “pitch” on why a stock seems like the right investment, then discuss the pros and cons with them.

There are many other resources that can help develop your preteen or teen’s understanding of finances like the Market Watch virtual stock exchange, where you can create a group for your family. It allows you to pick what stocks you want to invest in without spending the money, which makes it the perfect tool to begin teaching your kids how to trade without any risk. Active participation is key to kids understanding and wanting to participate.

Pick the Right Platform
When I started investing, I used apps that allowed me to buy my own stocks, but they didn’t offer any educational context. Which app your child uses matters to ensure they’re learning in tandem with making transactions.  Schwab is a good option because it offers extensive educational content with the added benefit of allowing you to purchase stock slices, which is great for a kid-friendly budget.

Once they understand how investing works, encouraging them to put their earnings in an account like My Accumulation PlanTM is one of the best ways to grow long term wealth*. When using a platform like MAP they will have an investing portfolio rather than just trading stocks.  One of the benefits of being a CornerCap client is that we provide education and resources, like MAP, to your family as you prepare your next generation to build their own wealth.

It’s very possible to simultaneously teach your children about finances / set them up with good financial habits while also kick starting their portfolio growth at an early age, which is a huge advantage when developing wealth.

Please let me know how your lessons go, or if you have any questions specifically about how to integrate MAP into your family’s financial education.  I’m here to help!

*Note that children must be 18 to open a brokerage account on their own, but parents can open a custodial account for children under the age of 18.

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