People talk about improving financial literacy for kids, but few seem ready to do much about it.
According to the Council for Economic Education, only one-third of states require their students to take a personal finance class. And its most recent Survey of the States, performed in 2018, “reflects no growth in personal finance education in recent years and little improvement in economic education.”
While states and school districts are still struggling with the idea of adding financial literacy to the curriculum for middle- and high-school students, what are parents of younger children supposed to do?
If you’re thinking about taking matters into your own hands, here are a few ideas:
Related: 6 investing basics to know
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1. Forgetting the stuffed animals and giving kids stocks
If you’re a parent (or grandparent), you know how hard it can be to find just the right gift for the child in your life — something that won’t be lost or quickly forgotten. Many of us turn to toys we hope will be fun and educational, but finding toys related to stock market investing for kids can be tough.
Which means you might have to move on to the real world and actually give your child control of some stocks.
If you want to make it official, you can open a custodial account and either make some picks yourself or let your child do the choosing.
One way to make the lesson more meaningful might be to think about the things that are important to the child at each stage of life and pick a stock that represents it (the company that makes your child’s diapers, for example, a favorite toy brand or toy store).
As the child ages, they can have more input, and you can talk about dividends, compounding, diversification and what it means to buy and hold. If your kiddo can’t make up their mind between two companies, you can work together to do some research.
It’s important to note that there are pros and cons to the different types of investing accounts available to minors, so you’ll likely want to check out any consequences related to future taxes and when the child applies for financial aid for college.
Another, more personal, consequence is that the child you love might not be thrilled with a share of stock when what they really want is the latest game. But if your child is truly intrigued, you might even find them eventually investing money of their own.
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2. Making a game of it
Not quite ready to put real money into a kid-centric portfolio? You and your children can still follow the markets together and track how they’d do if they were invested.
You could even make it a bit of a competition between siblings (kind of like making picks at a horse race without placing any bets). You can do it on your own or sign up for an online game.
Either way, you can teach your child about how the markets work without any actual losses (or crushing disappointments).
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3. Buying the book
This might sound like an old-school, boring way to explain investing for kids, but there are books out there that include plenty of illustrations, fun language and important lessons, including these highly-rated offerings from Amazon.
- What All Kids (and adults too) Should Know About … Savings and Investing, by Rob Pivnick — covers saving, budgeting and investing.
- Go! Stock! Go!: A Stock Market Guide for Enterprising Children and Their Curious Parents, by Bennett Zimmerman — follows the Johnson family as they learn the fundamentals of stocks and bonds, the mechanics of investing and the ups and downs of risk and reward.
- How the World REALLY Works: Asset Management 2018: A Children’s Guide to Investing, published by the Guy Fox History Project Limited — takes a big topic and breaks it down into terms kids can understand.
- I’m a Shareholder Kit: The Basics About Stocks — For Kids/Teens, by Rick Roman — a spiral-bound book that was recently updated (May 2018) and designed to appeal to kids who want to know about investing and managing their money.
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4. Getting some help from the Web (and Warren Buffett!)
If your child is more into screen time than reading books, you might want to check out Warren Buffett’s Secret Millionaires Club to inspire the investing and entrepreneurial spirit.
This animated series includes 26 four- to five-minute webisodes, and there are parent guides to download for each one (in English and Spanish). Sorry, there are no stock tips, but an animated version of the “Oracle of Omaha” does serve as a mentor on the show.
Want to teach your child about the magic of compounding interest? It’s missing the bells and whistles that generally appeal to kids, but the Compound Interest Calculator on the U.S. Securities and Exchange Commission’s investor.gov website is easy to use and understand.
Just plug in an initial investment, how much you expect to add each month and the interest rate you expect to earn. The calculator will chart out an estimate of how much your child’s initial savings would grow over time.
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5. Sharing your own family’s adventures in investing
Whether it’s a success story or a cautionary tale, kids can learn a lot from their own family history.
For example, you could talk about how your parents and grandparents made and saved their money vs. how it’s done today in a conversation about the value of investing and goal-setting.
You can focus on storytelling instead of lecturing and encourage questions, which may keep them more involved.
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6. Keeping lessons uncomplicated
No matter which platform you choose to teach your kids about investing, consider trying to make it as pain-free and uncomplicated as possible.
If you decide you’re ready to do some real-world investing, for example, you could look for an account that makes it easier — and as hands-on or hands-off as you want it to be.
Keep it fun and keep the effort going, and someday your adult children might be telling tales around the dinner table about how your lessons helped advance their financial savvy.
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