Investing for Kids: 5 Tips for Success

Teaching kids about investing doesn’t have to be complicated. With the tips we will give in this article, this task will be simpler and even fun, as well as being very good for the children’s future.

Did you know that financial education taught from an early age, including investments for children, helps you develop capable, financially and socially responsible adults?

Furthermore, it prepares children to deal with the ups and downs of their financial lives, to recover from any misfortunes in life and to learn from their own mistakes.

So, let’s go! Find out the best ways to teach children about investments!

Investments: why children need to know about investments

After all, why should I teach children about investing? Well, guiding children from an early age about investing is more than just teaching them how to make money.

For example, talking about and implementing investments with children teaches them to value money.

It is very important that children understand that money does not come out of nowhere and that making decisions about money is what makes it possible to live better, make dreams come true and avoid problems.

Thus, it is important, for example – when we talk about investments for children – to encourage savings.

In other words, teaching children to save part of their money will help them understand the importance of planning and saving for the future.

Also, when talking about investments, children naturally learn to consume and spend responsibly.

Children learn, from an early age, to differentiate needs from wants – as a result, they learn to spend their money intelligently and responsibly.

Talking about investments to children is yet another way to approach money in an open and honest way.

This is because we create an environment where children can feel comfortable clarifying their doubts about money and giving their opinions.

By learning about investments, children begin to understand the importance of managing their money wisely throughout their lives, right?

→ SEE ALSO: When Should You Give Your Child a Debit Card?

Types of investments for children

The idea of ​​investments for children, obviously, is not to place them in the financial universe of adults, the types of investments for children can range from the famous and well-known piggy bank, where they save and accumulate coins and small amounts until obtaining an interesting value, until you start operating a savings account.

Bank savings accounts can be opened in most financial institutions around the world for children as they are completely safe.

Obviously, to open this type of account you will need someone responsible. And you can explain to children how savings work.

That’s because this type of investment is really simple. In short: savings are a financial reserve that yields all the money invested in it according to the economy’s rates.

After certain periods, you will always have more than you put in (as long as you don’t use savings like a checking account).

And to explain savings to children, use playful resources. For example: coins, drawings or even grains of beans to simulate how much comes in and how much it yields.

What are the Taxes on a Children’s Investment Account?

In the case of opening an investment account for children, in most countries a guardian must do so.

Furthermore, the account must be operated by the person responsible (except for deposits and credits).

The taxation and taxes on these investments for children vary according to the country.

It is worth noting that in most parts of the world, the main holder of the investment savings account is a person under the age of majority.

And, upon reaching the age of majority, the person responsible loses control of the account, which passes 100% to the holder (in the case of opening, the child).

5 Tips for success when teaching kids about investing

You don’t need to be an expert to teach kids about investing.

To help, here are special tips that should be considered:

• Teach how to think about short and long-term goals: See how your decisions today can make a difference in your future. Understand that risk is not necessarily something to fear
• Invest with the child and not just for them: Don’t give money to a child, give them knowledge, right? This is not something they will learn in school. Parents must teach it. When they are young, ask them to open a savings account. As this account grows, consider opening an investment account in your name.
• Start setting a fixed percentage to invest: Once a child starts earning their allowance, earning money as a babysitter or earning money from a part-time job, set aside money for saving, money for spending and money for sharing with those in need. Apply these parameters to gifts as well. This attitude will stay with them throughout their lives, rather than trying to adopt it as soon as they start their first “real” job.
• Make investing fun: Make sure you create short- and long-term goals. For example, a 10-year-old isn’t thinking about how they’ll spend their retirement, so make sure your plans are relevant to today. Consider investing small amounts in some of your favorite companies, like Disney or Apple, so you can see what happens.
• Study yourself too: It seems obvious, but it’s not. To guide someone, especially children, you need to know. So, stay up to date on investments and everything about the financial market, right. Furthermore, a good idea is to study together with the children.

Children, investments and finances: what to teach at each stage of life

• 3 to 6 years: Education for income should begin in early childhood education and literacy, from 3 to 6 years old, when children begin to awaken to the value of things and the need for exchange around them.

At this stage, experts point out that there is a visual stimulus for little ones to see the money increase. Instead of giving them an allowance, opt for a clear bottle and encourage them to fill their piggy bank with the coins they earned during the week. Always talk to them about the conscious and collective use of money.

Also exercise the little ones through everyday examples, from explaining why a sweet is worth “x” to why such a toy does not fit into the family budget.

• 7 to 13 years old: After the age of 7, your children begin to better understand their relationship with money. If before the allocation was not the ideal bet to start your financial life, it should be a good option at this stage. Organize with your spouse a monthly or weekly amount to pass on to young people.

If you want the right amount of allowance, think about your children’s regular expenses and set achievable goals for them, such as staying in school and getting good grades.

With the money in hand, ask them to manage the amount responsibly. Always make sure that financial education is a heavy topic. Children can be encouraged through fun games, such as Game of Life and Monopoly.

• From the age of 14: At the age of 14, in addition to receiving an allowance, children must know how to take care of their own bank account.

Open a simple checking or savings account with them so they know the importance of education in achieving financial freedom. When you finish high school and start graduation, present a credit card.

The benefit is a great option to charge even more due date so as not to lose the limit at the time of purchase.

→ SEE ALSO: Budgeting for Children: How to Teach and Why it’s Important