Teaching the Young Investor
Some things to consider speaking to your children about when it comes to investing and planning their financial future
Just to set the tone for this article, visualize this imagery: approach your education about investing as though you were sitting down to eat an elephant. Roll up your sleeves and take it one bite at a time. The size of your bites and how fast you chew will determine how long it takes you to fully understand all there is to know about wise investing. After all that… pass it on to the next generation so they can be more prepared to succeed. This article was prepared by Gabe, one of CoinBundle’s very own crypto dads. He has 5 kids indifferent stages of learning about finances, so he knows a thing or two about talking to the little ones about money and investing.
This is not intended to be financial investment advice.
This article will offer some advice on educating children about investing practices.
In this article
Slow your roll
Kids are introduced to the concept of investing very early in life. Let’s say little Timmy has a big book report due in 6 weeks and he doesn’t start working on it until the day before it must be turned in. We have all been there before, but did you ever consider how it was an investment lesson? The final grade Timmy receives is going to be directly related to the amount of time he invested into the report. To be successful, he should have spent time reading the actual book, planning, researching, and outlining his report and finally drafting a couple of versions for proofreading and editing. This is easy to critique from the point of view of an editor, but it makes sense if you think about it.
- Didn’t eat all of your asparagus? No desert.
- Bad math test score? Taco Tuesday is cancelled.
- Low grades on your report card? No space camp.
- Didn’t clean your room up or do your laundry? No car this weekend.
If you fail to put the effort into the front end of an investment, then you will not reap any rewards or gains in the end. Your end might just be a blahhhhh or even a loss.
So, how can we as responsible crypto parents use this to our kids’ advantage? Continue to encourage your kids to set goals and remind them of milestones in their successes and failures and how those events shaped their future in both positive and negative ways. Relate this to a situation where a gain or loss of money or success occurs and really drive it home by bolstering their spirits by cheering them on!
Once your little ones aren’t so little any more and they are old enough to understand the concept of money and the value of a dollar, then it’s the right time to let them start to dabble. Remember that they have an entire elephant to eat, so take it easy at first. Always encourage questions and answer them patiently and with terms that are suitable for their comprehension level. Try not to overwhelm them with Wall Street mumbo jumbo and investor lingo because that can be very discouraging and intimidating to a young mind.
Teachable moments can happen at a toll booth, at a yard sale or in the grocery store. When you are shopping for everyday items, ask medium-sized Timmy if it’s a better idea to invest your money in 1 bottle of Zit Zap Elixir for $20 or if it is a better bang for the buck to get the 3-pack for $50? Maybe he will understand, but all he is really thinking about is clearing up his complexion… and girls.
Ease your youngins into investment concepts and let them develop their own passion for it. Kids are extremely impressionable — especially at younger ages. If you can get them excited in investing by slowly and naturally exposing them to the basic workings, they will have a higher chance of grasping the idea and being responsible with money. It is well-known that kids will burn out on ideas and concepts rather quickly, so it is imperative that you take real, tangible action with your young investors. Once they experience a return on their time or money, then it encourages them to do it again or go bigger next time.
Start small
If crypto is your primary focus when teaching your kids to invest properly, then you shouldn’t expect your efforts to be too fruitful. Actually, it may be best to teach them traditional asset investment practices and scenarios first. There is so much volatility in the crypto market that it would be extremely stressful and confusing not only to learn it, but also to teach it to a total newbie. Crypto is a new and developing asset class and learning to invest in the space requires you to know how to invest in general asset classes/personal finance from Jump Street, so don’t start off talking about crypto… even if you really, really, really want to.
When introducing a tweener or a teen to crypto, start the discussion by explaining blockchain to them first. Once the glossy stare melts away and the 100 yard stare focused comes back to center focus, they tycoon-in-training will surely have a handful of thoughtful questions that you can explore together. From that conversation, consider branching off and talk about topics like AI tech, crypto, fiat, and investing.
Along with normal discussion, let your kids invest in something small with you. For example: I remember having a discussion with my oldest boy about scrapping copper for extra cash. We were spending hours and hours stripping wires and gutting motors and transformers for the precious metals tucked away inside. I personally enjoy the time spent laboring and talking, but one day he asked me if there was any way to get the metal out easier and faster. He explained that we would be making more money per hour of effort. I was really impressed that he had put such thoughtful consideration into our hobby, that I humored him and explained a few tools that we could purchase to help us cut things up faster. So now we have some cool hand tools and are out of stuff to scrap.
Lessons within lessons…. The one above about supply and demand is for another day.
Get them interested
Once you’re comfortable with their understanding of what investing is and have instilled a general interest in them for investing, you can start to work on exposure. Have them look at some of their favorite companies, whether it be electronics, clothing, automobiles, food, or any other popular company they might enjoy. Don’t force them into learning about all the small and intricate financial details of those companies, but maybe expose them to their stock price history if they’re a publicly traded company. Also research the company’s mission and vision statements. It is important that your kids realize that they can invest in products that are aligned with their own personal values and beliefs.
This is a crucial point in the learning process, as you can use this to get them interested in both personal investing and maybe even stock market trading. Who doesn’t like making money investing in your favorite companies and products? Something that I have practiced and encouraged over recent years is investing in collectibles and figurines. We have Superman fans, Batman fiends, Star Wars junkies, and Star Trek freaks… well just one Trekkie in my house. It’s impossible to get them to drink the Kool Aid — perhaps I should try some Earl Grey?
We find it exciting to think that maybe one or two of the toys that we save away in the packaging might be worth a large sum of money some day. We are all set up to expect nothing and hope for everything. It’s fun this way — not stressful.
Loosen the reigns
The best way to learn something is to teach it. Teaching a subject matter forces you to learn about it and practice it yourself. Since we are teaching the kids to invest and we want them to learn, what better way to teach them about investing than to give them money to play around with for themselves?
You’re probably thinking, “Give a kid some money to lose on an investment?”
Well, you can always have them earn the money first, so yes! Have them invest it and monitor it and learn as much as they can from the process. They will obviously not be investing a large amount of money at this point. You will want to invest just enough that your child will be able to see the gains and losses as the asset performs in the market.
One possible way you can do this is by either giving them a small amount of money to help them invest with or opening up an investing account for them to use their own money on. Remember the golden rule of investing: never invest money that you aren’t cool with losing.
Conclusion
This information will hopefully help you be considerate of your children’s investment education. None of us started off by knowing everything, and we have all made some bad investment decisions. What we need to pass on to the next generation is the skill of learning from our mistakes and the mistakes of others in order to gain wisdom.
Gain wisdom and gain gains.
Have you already started teaching your kids about investing?
Let us know how it’s going in the comments!
