Habits instilled at a young age can powerfully set your children on the path to financial freedom as investors. Saving for toys, saving for college, investing for a car, or investing for a future vacation are all goals you can help your children work toward.
With the proper instruction your children will become savers and investors - able to take care of themselves and their families for life. Is that not a fantastic legacy?
Sadly, even well to do families often buy their children stuff but never bother to include the children in saving and investing decisions or education. Untrained kids end up on their own unable to deal with limited income, falling into credit card debt.
This article will touch on specific steps you can use to teach your children about managing, saving and investing money.
- Difficulty: Moderately Challenging
Things You'll Need
- A Child
- A little money to invest
- A commitment to teaching your kids to invest
===Bank Savings Accounts for Children===
Your first step to helping your child learn to invest is to open a bank account in the child's name with yourself as the Guardian.
Typically children's bank accounts are completely free or very very low cost. Often banks pay premium interest rates to children as well. Sometimes banks or credit unions give free gifts (piggybanks, books) to children for opening an account as well. Watch for these promotions.
As the clearing house for your child's money, her bank account will form the center of your child's investing world.
===Stock Investing for Children===
Start by picking (or having your older child research and help pick) a stock that has these attributes:
~~~Pays Consistent Quarterly Dividends
~~~Good Earnings Track record
~~~Direct Investment Program and Dividend Reinvestment Program (DRIP)
~~~An Industry Your Child Can Relate Directly To and that sells physical products your child can touch and feel and personally uses regularly.
Examples in no particular order or preference include Disney (Entertainment), McDonald's (Fast Food), Hasbro (Toys), General Mills or Kraft (Food), Coca-Cola or Pepsico (Beverages) or perhaps Hershey's (Candy)
Once you have the company picked buy a share or a few shares and enroll in the DRIP.
Look for ways to involve your child in learning about the company as a way of learning about the world of investing. Remind the child that they are an owner in the company that makes the products they use. Ask them to watch what competitors are doing and see what effects new ads, new products or competition moves have on their company.
===Precious Metal Investing for Children===
Teach your child the value of gold, silver and other precious metals from a young age. This includes visiting a coin shop together, visiting a jewelry store together, and doing library research.
===Base Metal Investing for Children===
Teach your child the value of a penny and a dollar, and the value of setting money aside for the future. In the USA, Canada, UK and a few other countries there is currently an opportunity to collect silver and base metal coins from circulation that are worth more in metal value then in face value. As soon as your child can read dates accurately you can get him involved in base metal coin hunting or coin roll hunting as it is often called.
Check out Coinflation.com to see what US and Canadian coins to target.
===Savings Bonds for Children===
You can encourage grandparents and other relatives to give your child savings bonds instead of toys. This is a very traditional way of saving for a child's education but with the prospect of hyperinflation and historically low interest rates, savings bonds may be a very poor investment. Do some research into these topics and/or have your child research inflation, money supply, and interest rates to decide if savings bonds are right for you and your child.
===Small Business for Children===
When age appropriate, encourage your child to start a small business. It could be selling lemonade, raking leaves for neighbors, or finding and selling old coins in rolls. Whatever the child is interested in.
Try to include hiring another child (supervising), some marketing (signs, ads, viral marketing) and other business skills in the small business.
Giving the child a taste of business may spark a lifelong passion to own their own company and be their own boss. Even if they choose a traditional career, your child will be a better person for learning how business works.
===Real Estate Investing for Children===
If you are involved in any real estate investing, including owning your own home, try and involve your children in financial decisions and property management. It can start with chores and move up to helping with sorting receipts, visiting the bank to get a loan, and looking at property with you.
If you have a friend who invests in real estate or sells real estate try to get them to allow your child to tag along for a day to learn what they do and how they do it.