The first time I heard about stocks and how they work, I was in college. I immediately dismissed them as a concept that is not for me. I didn’t have money to spare for the market, plus I didn’t want to lose a penny. I’m sure a lot of people feel this way. The thought of losing your money especially since it’s beyond your control is very scary. You hear all these stories of people losing their money in the stock market. What you don’t hear is that they made a mistake. They put too much money in a few stocks hoping for a big win, which is not the right way to invest. For years I have been wondering why the heck do people sell the stock when it’s down. Recently I found it’s because it’s a psychological impulse based on fear!
Little by little I am learning about stocks, index funds and retirement options. The more I learn, the more confident I am in investing in the market. It is also reassuring to know that even the experts don’t know everything about investments. Technology has been such a huge help to allow everyone to invest in the stock market not just the elite.
I want my kids to be familiar with the stock market. I don’t want them to be scared of investing wisely. I definitely don’t want them to be afraid of numbers. I have seen too many people’s eyes glaze over when they see numbers and it doesn’t have to be that way.
Recently someone told me they can’t figure out a simple division equation and they are in the ripe age of 60. I doubt this person cannot actually divide or at the very least use a calculator. Many people just don’t want to be bothered, they are intimidated by numbers and block them out. Believe me, I do that myself.
This is why I think it is crucial to teach your children about money. Forget about the societal concept that we shouldn’t discuss money, that has not helped anyone. Talk about money, talk about money problems and find the solutions you need. Ask people for advice (not just one person and maybe not someone with money problems). Learn from people. WE are all teachers in our own way. Let me get back to kids and how THEY can learn.
How to introduce the concept of the stock market to your children:
Simple rule: Keep it simple !
If you see their eyes start glazing, you are losing them, you are complicating things, so retract and start again. I first introduced it to them by saying: “We can own a very tiny piece of a company. When you buy a tiny piece of a company by saving up your allowance and buying, that money will grow! It will not grow in a day, it will grow in years. Since it will take years, you don’t put all your money in it, you just put a little bit of it and see what happens.” Then I asked what company do they want to own? They got to choose which stocks to buy. Their uncle invested in a race horse but he is not the only investor, so we joke with them, and say their uncle owns a horse’s ear. We were able to give that as an example of how stocks work as well.
So the next step for the kids was to actually invest and see how it actually works. My daughters do get a weekly allowance for all their chores. My 13 year old gets $6 per week and my 9 year old gets $4 per week (allowance based on experience haha). Originally my thought was if they earn it, they can spend it as they wish. I started noticing a trend, my oldest one was spending every penny and my youngest refused to spend anything (not a bad trait at all). I had to change it up, my oldest had no sense of discipline so that’s how I came up with the idea of them investing in stocks. I had them each save up $150, they were not allowed to spend anything until they saved their goal. Once they reached their goal, we went to SoFi (click on referral link for $25 bonus cash), and we opened an account for each child. It was super easy, it took a few minutes. The kids and I chose a mixture of index funds and stocks and we invested their $100 plus the cash bonuses we received. No they will not be rich, but the lesson here, is how to invest. Set it up and forget it! Would be willing to try this method out? Please ask me any questions about this article, I will be happy to expand on this subject !