Three Ways To Teach Your Kids To Invest Smart

The concept of “stock” is nebulous for the younger ones to comprehend, so it’s best to keep the language simple. Using words to connect ownership to investing creates a long-term investor mindset. You don’t want the children to focus solely on stock price movement; they should strive to build discipline by focusing on the long-term value of a business – and all because you provided the perspective.

 

#3. Guide them overall to own quality investments. 

If they’re asking questions about speculative, ethereal fantasy coins, don’t discount the curiosity. There’s also nothing wrong with exposing them as long as the difference between speculating and investing is clearly understood. Create a rule that works for your family. Ask your teen how much he or she is willing to lose. If it isn’t ‘everything,’ then so-called meme stocks and crypto may not fit.

I spoke with a willing mom who needed to break on how much her 15-year-old daughter wanted to invest in Ethereum. Daughter wanted all her savings in crypto – $500; mom helped her settle on half, which was a good decision as they purchased at $4,100 back in mid-May. As of this writing, Ethereum is $2,628.38.

The other $250 was invested in Hasbro (HAS), the toy and game company, at the same time. Short term, the stock investment is working, and crypto being speculative, has greater gyrations than expected. The difference is mom prepared her daughter for the risk, and instead of being turned off to investing, her teen is not dismayed by the loss and is keeping it in perspective. 

 

When we teach our kids, we get better too!

Interestingly, many parents find it awkward to discuss stock investing with their children. Some adults don’t feel confident in their abilities to do research. What I’ve discovered is the lessons with kids actually helpless confident parents improve their own game and become better stock investors.

Through this period where young people are willing more than ever to invest, it’s important for parents to exhibit their best ‘Ward Cleaver’ and guide them properly so when the next downturn occurs (and it always does), the event doesn’t turn off a new generation to stocks and perhaps even more speculative ventures.

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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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