In the world of day, understanding investing as an adult is a major necessity. As soon as your kid enters the world, investment serves to be a tool to earn money which your child can use in his/ her life. As finance isn’t taught in schools, it is the duty of the parents to ensure that their kids learn the basics of investment.
With a number of adults not understanding investment themselves, it could be a tedious job. Luckily, you don’t need to be an investment expert to educate your kid. Here are some tips to teach the basics of investment to your child:
Set goals: You don’t have to create the next Warren Buffet. Good if you do, but that’s not the ultimate objective and obviously it would create too much of a pressure on the child and parent. Investment can get complicated, so it is important to keep it simple and follow the basics.
Start with a custodial account: the best way to make a child learn is by doing it. No matter how greatly you explain investment, it is not enough. It is important to show the child. And you can do it by opening a custodial account. At Loved, we give you the opportunity to open a custodial account and buy stocks for kids which they can manage after they reach maturity. Show them which stocks are promising and how they can make money through them.
Explain investment: Investment, in simple words mean spending money to earn more money. Explain to them how a new product launch or product failure can impact their investment. Ask them to check out their favorite product stocks such as Disney or Apple. This will help their experience and knowledge grow exponentially. Tell them how they can earn profit by buying at low and selling at high. Ask them to keep a monthly record of their profits. This will enhance their interest.
Reasons to buy stocks: Just like people put money in their account for future use, they buy stock in companies to make money. It is a means to allow the company to borrow your money and in return give you a percentage of profit. If a company performs well, its stock price rises. If it doesn’t do well, then you may lose money. Stocks of Amazon, Berkshire Hathaway, Apple or Coca Cola are quite famous and on the rise.
Keep the conversation going: It is possible that your child may not be able to understand all of this, but that’s fine. It is not necessary to make them grasp investing in one go. You need to make it as an on-going conversation and include it in your daily regime. If your child loves shoes, then ask them to keep a check on Nike. This will help to them think about companies behind the product and reason why they are succeeding or failing.
With the right approach your child will soon learn to take care of the stocks you have bought as custodian for him at Loved.
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