Investing is an essential financial skill that is beneficial to start educating your children early on the fundamentals

Investing is a powerful financial tool that everyone should understand. The sooner you start teaching your kids the basics, the better! Help your children understand that the goal is to buy when things are inexpensive and sell when they’re worth more. Investing is often done by buying stocks (very small parts of a company). Stocks are worth more when the company is doing well and less when the company is struggling. Since you own part of the company, you may also get payments/dividends when that company earns a lot of money. As the child gets older, you can touch on more complex aspects of investing.

Track the Stock Market: Have your child pick a few brands they like such as their favorite clothing company, cereal, sports equipment, soft drink, or gaming company. Once they’ve picked two or three, go to the company websites or a general financial site and show them how to track the stocks. You can also point out news articles about the company and have them predict how that will affect their stocks. For example, if a sports drink company decides to stop producing a popular flavor, you can discuss how that may lead to a drop in their stocks. Track how the stocks change to see if your child’s guesses were right or wrong.

Start Investing: Get your child actively involved in investing by “selling” some of your shares to them. For example, if you’re planning to buy 200 shares of a particular company and you have two children, buy 202. Sell the extra shares to each child either at the price you paid or a discounted price if it’s too high. You can keep track of the children’s shares in a separate register so they can follow what happens and earn some money if the stocks do well. (Be willing to buy the shares back if they prove disappointing.)

The sooner you start teaching your kids about investing, the better! Who knows, you may be raising the next Warren Buffet or Suze Orman!