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.
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.