This is not your typical question for the P123 forum, but thought I’d put it out there as I respect the opinions of this great P123 community.
Perhaps a common story for many, but growing up I had little to no financial education. Money was very taboo in my household, and it was definitely not a subject taught in school. I managed to get a good education and a career (outside of finance or investing), but until my late 30s left my portfolio to financial planners and the banks’ packaged funds. About 5 years ago I started taking full control of my investments, made several mistakes along the way, and landed on quant investing (and am not looking back :-))
As a parent, a key priority for me is to get my kids on the right track with investing as early as possible. I often hear of stories of professional and full-time investors today (as grown adults) who started investing in their teens.
I’m not putting that expectation on my kids, but at the very least I want them to know what investing is, why it’s important, etc.
I have tried, but perhaps they’re too young yet (10 and 8). The language I speak goes right over their heads, even when I try and take it down to an elementary level.
The conventional wisdom on this is to buy your kids stocks of companies that they already know, brands they like etc. At their ages, my boys aren’t quite there yet.
I was hoping the community could share some of their experiences in getting their kids involved, or at least educated, in investing.
Hi Ryan,
I have 3 boys all in their 20’s. I started educating them in their early teens. I found the best way to get them started was to teach them about compounding. When I first mentioned the word their eyes glassed over but when I showed them a simple example of how they could have a million dollars by contributing 5k year for 35years @8% they started to get more interested. I let them play with an online compound interest calculator and that got them excited as to the possibilities. Now all of them have started and they are well on their way. The hardest part for me was explaining to them that the latest cyrpto/pot or redditt fad stock is not the way to go. They are all in different professions but they like the simple formula of buying an index etf and just letting it grow. They don’t have to invest a lot of time, the fees are low and I know that if they are consistent with the yearly deposit that my grandchildren will be well taken care of.
When my 2 kids started Jr. High School we opened each a checking account and got them both credit cards. Monthly we added to each checking account all the expenses they would need for the month. That included school lunches, funds for clothing, Etc. and a allowance based on the weekly chores required from them. If they didn’t complete any chores the allowance was reduced accordingly. it took both of them a number of months to learn how the still have any money left at for the last week of the month. They both learned that if they made their own lunch they would have more spending money. When they started driving we added all the expenses for the cars to their allowances.
I started trading systems I developed on P123 in April 2004. That summer when my 2 Kids were out of school, I required them to sit with me Monday mornings for about an hour while I reviewed the systems’ recommended trades. (At the time they were in their early teens.)
So, once a week they got exposed to how P123 works, how to evaluate companies, risks, and costs of investing. I had started a $10K College fund for each of them that I added to each year. After discussing each company I let them chose the stocks to by in their accounts. Slowly, they learned a few lessons on risks and rewards. They even competed with each other to see who could make the most money. (my Daughter beat my Son most years) After they started Collage I allowed them to control their accounts themselves.
They were both able to pay for college degrees, and they still have $1Mil+ in their funds.
Sad none of the investment skills are taught in school. It is such a multifaceted discipline. Brett and Denny both great examples. My advice would be to teach them how to save money. It’s just as important as investing. Some of the richest people I know did not get rich via stocks. They know nothing about the stock market. They work hard and save their money and reinvest it in their business. I am teaching my kids to live within their means and to always save 20% of what they earn. When ever they walk by my desk and see me working I always take the time to tell them what I am doing. Explaining options strategies, bonds, stocks, real estate, lending, commodities is hard but I a make it a game. I’m not good at it but I try. I also explain the lifestyle we have is based on hard work and sacrifice. There is no free lunch. They roll their eyes.
I don’t have kids, but wanted to share that I started by collecting baseball cards. If your kids are into something like that it might be an easy transition to explain what stocks are and how they’re different. Also agree with Brett’s suggestion about something like an excel sheet that shows compound interest. I don’t remember when I was first exposed to the idea of compounding - but it left a powerful impression on me. Especially the example of starting saving at age 20 vs. waiting until 30 or 35. Made me realize the importance of taking advantage of youth and time.
I started investing in stocks when I was young but really had no idea what I was doing other than betting on low priced tickers I saw in the newspaper. That led me to reading books like Malkiel’s Random Walk Down Wall Street, Peter Lynch’s books like One Up on Wallstreet. It was expensive for me to trade back then (before the era of discount brokers), but I do think me playing around investing my lawn mowing money (and losing some of it) in middle and high school is actually what got me more interested in things. all fwiw.
Brett, showing them compounding is a great idea. I don’t think they’re quite there yet to completely get it (or appreciate it), but soon.
Denny, I have to say that’s an impressive investing record for your kids, to have a balance like that just out of school. But, not without hard work, with years of planning and the right steps. This is definitely something to aspire to.
Mark, I agree that its a disservice to society that our educational system does not include useful financial guidance for young people. It really is one of those skills that is either learned independently (either the right way or the wrong way), or passed down from our parents (which could also be good or poor advice unfortunately).
In “investing” in this context, there is the literal investing of hard earning money to earn returns, however spending the time and effort to learn, or investing in investing, is as important, if not more so. I believe I will be able to provide my kids with a decent nest egg once they hit the real world in 10 years or so, but my true measure of success will be if I can teach them to invest and manage their finances responsibly themselves.
Or to adapt a common phrase: “Give your kids money, and you keep them happy and safe until the money runs out. Teach your kids to invest, and they have the tools and freedom to do whatever they wish.”