Introducing Kids to Investing

Setting the stage

As your kids learn more about managing their money, introduce the concept of investing. It's a great way to reinforce the ideas of goal setting, saving, budgeting and more. And it can help put them on a long-term path to financial independence.

Keep it simple

The best way to get kids interested in investing is to speak their language. Start by explaining that investing is a means of using your money to try to create more money.

Make it real

To get attention, try using a tangible long-term goal. For instance, how could investing help your teen reach a particular dream, like college or trekking through Europe?

If this doesn't inspire interest, try the cold, hard facts. Not investing your money (for instance keeping it under a mattress or even in a low-yielding savings account) may be less risky, but you'll have a tough time maintaining purchasing power over timeā€”in other words, keeping up with inflation.

To explain how it works, let's use groceries as an example:

Groceries worth $100 in 1950 would cost about $950 today. Fifty years from now they may cost $6,500! This example assumes an annual inflation rate of 3.9 percent, which is about the average for the past 50 years.

It's important to note that inflation can vary widely from decade to decade, and even from year to year. But even so, investing has historically been an effective way to help your money grow and keep it from being eroded by inflation.

Want more ideas? Read advice for raising kids and teens by Carrie Schwab-Pomerantz.

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Investing involves risk, including possible loss of principal.

The information on this website is for educational purposes only. It is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner, or investment manager.

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