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Investing for Kids – How to Teach Your Children About Stocks

on 9/17/17 by Miguel A. Suro
8 Comments

teach kids about stocks

Back when I was a kid, I remember our household still received an old-school physical newspaper (that kind that filled your hands with ink when you handled it, and that you might’ve re-used as a wee-wee pad for the dog). One day, I picked it up and landed on the stock market pages. Seeing all those weird columns with ticker symbols and numbers, I asked my dad what they meant.

I was awed when he explained that those abbreviations stood for companies that I knew (like Marvel, the comics creators) and that you could buy a part of those companies, but that you did not actually own any physical thing.

Fascinated, I begged him to let me use my saved-up allowance money to buy some shares of Coca-Cola and Pepsi. Finally, he relented, took the money, and had his broker buy him five shares of Coke and five shares of Pepsi.

Over the next couple of years or so, I tracked the shares and felt proud each time I had a soda (which wasn’t much, because my parents wouldn’t really let me). Finally, like two years in and needing money for something, I asked him to sell the shares. I got my money; I got my goods. He took care of the commission.

So why did I tell this story? Because it taught me a lot about finances, the stock market, and even the world, and I think it’s a great idea for anyone’s family.

Not Just Investing For Kids

Obviously, doing this is an opportunity to teach children about stocks, the financial system, and the stock market. About how people invest in shares and how they are bought and sold on the exchanges. You can also explain how corporations issue payments per share in the form of dividends – which is arguably one of the main objectives of their existence (from their shareholders’ point of view).

You Can Teach Your Kids the Concepts of Intangible Property and Fractional Ownership

With this investing for kids lesson, you can also teach your young ones about how it’s possible to own a part of something, rather than the whole. About how you can own something without physically having it, and how you can “invisibly” split the ownership into many pieces. Maybe like how mom and dad can each own half of the house or half of the car or even half of the TV.

Perhaps it’s a good way to develop abstract thinking skills; I dunno, I’m just a blogger.

You Can Teach Your Kids About Sharing and Shared Decision-Making

Could this be the most important lesson? Mom and dad both own the TV; they each get a say as to what channel is on, and none can sell the TV without the other’s agreement. In the same way, you can tell your young ones about how each shareholder owns a little piece of a corporation, and gets to vote on how the company is run.

investing for kids

Checking stock prices…

You can take this as far as you want, even going into how democracy functions in a similar way, with each adult getting a vote.

You Can Teach Your Kids About Patience, Risk, Savings, and Delayed Gratification

For most of us (even for Warren Buffet, the Oracle of Omaha) making money in the stock market requires patience and an appetite for risk. Having your kids buy a few shares of their favorite companies can therefore be a teaching moment for lessons about what it means to take a risk that may pay off in the future, and how to think about the odds of that payoff taking place.

It can also teach patience, and how one can save money and invest it, and be rewarded with long-term growth.

Summing It Up

This can be fun, and a great learning experience. I can say that, for me, it helped cultivate a sense of curiosity and patience as I learned what the stock market was and saw my money grow. It was also neat to think of how I was getting just a little bit richer when my friends popped open a Pepsi.

So, it’s not just investing for kids; it’s a whole lot more!

Disclaimer: I’m not a child psychologist. I’m going by my own experience here.

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About Miguel A. Suro

I'm Miguel A. Suro, a Miami dad, attorney, journalist, and entrepreneur devoted to helping you live well for less. I've been seen on the NY Times, CNBC, NBC News, and more. Get to know us on:

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Comments

  1. SMM says

    September 18, 2017 at 1:26 pm

    Good points! Also, it will help teach kids that little by little over a long time, can go a long way. It’s better to invest in stocks rather than putting your money into a savings account. I think if we visualize this long-term growth for them; their eyes will light up – like they do for my son when I surprise him with a piece of chocolate cake 🙂

    Reply
    • The Rich Miser says

      September 18, 2017 at 1:34 pm

      Indeed; now I’m thinking of chocolate! 🙂

  2. Logan @ Money Done Right says

    September 18, 2017 at 4:34 pm

    I don’t have kids yet, but whenever my parents’ or sibling’s birthdays roll around, I either give them shares of stock or Lending Club credit! Before I started doing that, they don’t know anything about investing. But now they do!

    Reply
    • The Rich Miser says

      September 18, 2017 at 4:37 pm

      Wow, I think it’s great that you do that!

  3. Josh says

    September 23, 2017 at 6:53 am

    I plan on buying a stock or mutual fund for our children. My dad bought an index fund when I was in grade school but I didn’t know anything about it really until I turned 18 and was just starting to get into money management myself.

    Reply
    • The Rich Miser says

      September 23, 2017 at 10:18 am

      Sounds like a good idea 🙂

  4. Enoch @ Savvy New Canadians says

    September 26, 2017 at 9:32 pm

    I agree! My interest in the financial markets started early when as a teenager I scanned through financial newspapers sent to my Dad in the mail (he had subscribed to a couple). And then, when my dad went ahead and purchased a few bank stocks in my name, I have been stuck in the investment mindset ever since.

    Reply
    • The Rich Miser says

      September 26, 2017 at 11:21 pm

      Sounds like he did a great thing for you 🙂

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