Three Ways To Teach Your Kids To Invest Smart

In the current environment where exuberance and excessive risk-taking have infiltrated every asset class, the question to self-reflect on is – “Am I the cogent, unemotional voice to help my children invest wisely and for the long term?”

Leave It To Beaver comes to the rescue!

On an episode of Leave It To Beaver (I kid you not), ‘the Beav’ and his brother become interested in stock market investing. Dad suggests a profitable, staid dividend payer – Mayfield Power & Light. Smart-mouthed friend Eddie Haskell recommends the ‘zoomer’ Jett Electric, a penny stock. Well, the boys listen to dad and buy a couple of shares (through dad’s broker) of Mayfield for $25 bucks a share. The thing moves like a slug. Twenty-five cents up. Twenty-five cents down. Flat for days.

Meanwhile, Jett Electric takes off like a rocket which causes the boys to regret their decision leaving dad a bit dismayed how a company with no earnings can do so well. Ward Cleaver is also concerned about the impression his investment selection makes on the boys for the long term – especially when Eddie comes over and rubs it in –  “If you listened to me instead of your father, you’d be in the clover today.”

Ultimately, the brothers ask dad to sell Mayfield and move the proceeds to Jett. You can probably guess what happens next. Jett tanks. Mayfield continues on its merry boring way. Little did Beaver and Wally realize (and the audience until the end), dad had already dumped Jett and repurchased Mayfield. Naturally, the boys are relieved; father saves the day, and Beaver, with admiration in his voice, says – “You must be the smartest man on the planet, dad!” The end. Or is it?

Now, I don’t expect any parent to be a Cleaver. However, if you’re as carried away over Reddit bulletin boards, crypto, and short-term speculation as Eddie, how do you expect to be the proper co-pilot to help your kids navigate the current dangerously euphoric terrain?

Maintain an unemotional head, watchful eye, and explain the difference between gambling thoroughly and investing as best you can.  If this is complicated, set a time for your children to speak with a trusted financial partner. Let them help with the responsibility because flying the investment plane alone is not a good idea.

 

#2: Teach the kids that investing is always homework first.

Investment decisions, especially the timing, are mostly far from perfect. I mean, ask the Cleavers! An investor can undertake thorough fundamental and technical analysis and still lose. A financial leap of faith happens with every trade initiated. Nevertheless, homework helps place greater odds in an investor’s favor for the longer term. Kids get the concept of homework. Just observe the little ones as they wrestle with their assignments before bed.

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Disclosure: Real Investment Advice is powered by RIA Advisors, an investment advisory firm located in Houston, Texas with more than $800 million under management. As a team of certified and ...

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