4 Age-Appropriate Tips for Kids on Investing Money
This is the fifth and final article in our series “Talking to Kids About Money.” In this series, we’ve touched on a variety of topics related to how and why to talk to children about money at an early age. For our last topic, we will focus on investing.
4 Age-Appropriate Tips for Kids on Investing Money
By: Judy Cohen
The saying goes, “a penny saved is a penny earned.” The reality is that a penny is only a penny if it’s not invested wisely.
When teaching kids about investing money it’s important to make the conversation age-appropriate and relatable. Many parents may believe talking about investing is more effective when kids are older. But as we’ve noted throughout this series, the earlier the better when it comes to money.
Here are four age-appropriate tips for teaching kids about investing:
1) Plant the seeds – when kids are young the idea of investing money can be hard for their little minds to grasp. But if you can describe the process through familiar actions like planting seeds to grow in a garden, there is a better chance it will sink in.
Most kids at this age are familiar with how a seed, when planted in dirt and watered regularly, can turn into a flower, plant, vegetable or fruit. In this example you can talk about how the seed is the money and the care and attention is the investment. If you take care of the seed/money, over time it will grow into something bigger and better.
2) Set financial goals – Why is investing a good idea? It helps you meet your financial goals. So introduce the concept of financial goals in ways that kids can relate to. For example, if your child wants a bicycle, they can save their money from allowance or odd jobs around the house. But what if ten years from now they want a car? You can introduce the concept of investing and growing their money so they have a better chance of reaching that big goal.
3) Follow kid stocks – the stock market can be confusing so explain it in relatable and familiar terms. For example, most kids at an early age know company names and what they do or make.
Pick and follow stocks from their favorite companies and talk about how they can “invest” their money by buying the company’s stock to own their very own piece. What kid wouldn’t love the idea of owning part of Disney? Teach them how to follow the stock price in the newspaper or online each day and track its progress. Explain that if the company makes money, so do they. But if the company loses money, they do too.
4) Take a risk to make a reward – (Note: this conversation is probably best for middle school-aged kids.) At a young age, we stress the importance of being a risk-taker when it comes to things like trying new foods, playing sports and simply stepping out of our comfort zones. This same concept can be applied to explain the ups and downs of buying into the stock market. Investing has risks and this needs to be communicated.
Buy a few “kid” stocks from your child’s list and take time to explain the risks and rewards of playing the stock market. (Note: minors aren’t allowed to buy stocks in their name so you’ll need to do this for them.) Explain how companies are always coming up with new and innovative ideas and products to help their customers or community – and make money – so in turn, their stockholders make money too. Teach them the importance of researching a stock so they’ll better understand the associated risk.
It’s up to us as parents to teach our children money skills to build a healthy financial future. How and why it’s important to invest money should be right at the top. Getting your kids interested in investing early on by taking the time to explain concepts like stocks, savings, returns, risks and rewards will only help strengthen their financial skills for a lifetime.
About Lemonade Day
Lemonade Day is a non-profit dedicated to teaching every child across North America the business and financial skills that are the key ingredients of entrepreneurship. By learning these skills early in life, children will be better prepared to be successful, financially healthy adults. Through our fun, hands-on program Kids K-5 are empowered to start their very own business—a lemonade stand—and experience the feeling of earning real money, using 100% of their profit to spend, save and share based on their own goals.
Visit LemonadeDay.org to learn how to participate in Lemonade Day in your city.
back to blog
This is the fifth and final article in our series “Talking to Kids About Money.” In this series, we’ve touched on a variety of topics related to how and why to talk to children about money at an early age. For our last topic, we will focus on investing.
4 Age-Appropriate Tips for Kids on Investing Money
The saying goes, “a penny saved is a penny earned.” The reality is that a penny is only a penny if it’s not invested wisely.
When teaching kids about investing money it’s important to make the conversation age-appropriate and relatable. Many parents may believe talking about investing is more effective when kids are older. But as we’ve noted throughout this series, the earlier the better when it comes to money.
Here are four age-appropriate tips for teaching kids about investing:
1) Plant the seeds – when kids are young the idea of investing money can be hard for their little minds to grasp. But if you can describe the process through familiar actions like planting seeds to grow in a garden, there is a better chance it will sink in.
Most kids at this age are familiar with how a seed, when planted in dirt and watered regularly, can turn into a flower, plant, vegetable or fruit. In this example you can talk about how the seed is the money and the care and attention is the investment. If you take care of the seed/money, over time it will grow into something bigger and better.
2) Set financial goals – Why is investing a good idea? It helps you meet your financial goals. So introduce the concept of financial goals in ways that kids can relate to. For example, if your child wants a bicycle, they can save their money from allowance or odd jobs around the house. But what if ten years from now they want a car? You can introduce the concept of investing and growing their money so they have a better chance of reaching that big goal.
3) Follow kid stocks – the stock market can be confusing so explain it in relatable and familiar terms. For example, most kids at an early age know company names and what they do or make.
Pick and follow stocks from their favorite companies and talk about how they can “invest” their money by buying the company’s stock to own their very own piece. What kid wouldn’t love the idea of owning part of Disney? Teach them how to follow the stock price in the newspaper or online each day and track its progress. Explain that if the company makes money, so do they. But if the company loses money, they do too.
4) Take a risk to make a reward – (Note: this conversation is probably best for middle school-aged kids.) At a young age, we stress the importance of being a risk-taker when it comes to things like trying new foods, playing sports and simply stepping out of our comfort zones. This same concept can be applied to explain the ups and downs of buying into the stock market. Investing has risks and this needs to be communicated.
Buy a few “kid” stocks from your child’s list and take time to explain the risks and rewards of playing the stock market. (Note: minors aren’t allowed to buy stocks in their name so you’ll need to do this for them.) Explain how companies are always coming up with new and innovative ideas and products to help their customers or community – and make money – so in turn, their stockholders make money too. Teach them the importance of researching a stock so they’ll better understand the associated risk.
It’s up to us as parents to teach our children money skills to build a healthy financial future. How and why it’s important to invest money should be right at the top. Getting your kids interested in investing early on by taking the time to explain concepts like stocks, savings, returns, risks and rewards will only help strengthen their financial skills for a lifetime.
About Lemonade Day
Lemonade Day is a non-profit dedicated to teaching every child across North America the business and financial skills that are the key ingredients of entrepreneurship. By learning these skills early in life, children will be better prepared to be successful, financially healthy adults. Through our fun, hands-on program Kids K-5 are empowered to start their very own business—a lemonade stand—and experience the feeling of earning real money, using 100% of their profit to spend, save and share based on their own goals.
Visit LemonadeDay.org to learn how to participate in Lemonade Day in your city.
STAY CONNECTED TO LEMONADE DAY NATIONAL
@LemonadeDayNational