Question: how do I get my kids interested in investing?
Question: how do I teach my kids about investing?
Question: my kid wants to invest. I’m new to this. How do I get my kid started?
When you spend all of your time in Facebook groups like ChooseFI, BiggerPockets Money, Mustachians in Practice, and a number of other FI-related or military-focused groups (because I’m a military veteran, too), the same questions start coming up over and over and over again, like the one(s) above.
In those same Facebook groups are dozens, if not hundreds, of helpful suggestions, anecdotes, and answers to the above questions from many ordinary folks like you and me. Naturally, that leaves person asking the question even more confused. Why isn’t there just one answer to the question? Why are there so many different options to choose from, and which one is right for my kid(s)?
The GREAT NEWS is: there’s more than one way to teach your kids about investing!
The WRONG Way
Before I dive into the number of ways to teach your kids about investing, I want to point out that there’s one distinctively bad way to teach kids about investing: by giving them a book.
Typically, when someone looks for a “book” on the subject, out come suggestions for tomes running anywhere from 200-400 pages of heavily analytical, dry drippage about…what were we talking about again? If you give a kid a book, chances are the book will collect dust on a shelf instead. I say that from personal experience, as I’m finally dusting off the dozens of books my own FI dad gave me decades ago, mainly because I don’t have a normal 9-5 job at present (cue Dolly Parton).
And if you think about it, if books were actually engaging for kids, then we wouldn’t have kids attending school all day, pretending to listen to teachers…
So, quell your first instinct to “pick up a book for my kid.” Instead, go for these three easy steps.
STEP 1: Find Some BITE SIZE Ways to Talk About Investing
Find “bite size” ways to keep kids engaged for the length of their attention span. Different kids have different preferences, so try a few different methods. Articles printed off the internet at large worked for me in the early 2000s, but technology has gotten MUCH better since then. Nowadays, your options include:
- YouTube: start with a key word search like “kids investing” to bring up channels like Our Rich Journey
- Blogs: JL Collins has the best blog for investing, but classics like ChooseFI has portions devoted to investing as well.
- Facebook/Reddit: I mentioned all those groups that I’ve been in, and you can be in them too! Simply go to any group page, search for “kids” and/or “investing,” and let the groups teach you from there.
- FREE Formal Courses: ChooseFI for K-12 and Fiology are my favorites.
- Board Games: Cash Crunch Games, Broke the Game, and even good ol’-fashioned Monopoly.
- Articles: simply start with a google search like “teach kids investing,” and let the search take you from there.
STEP 2: DIY!
Once your kids have some healthy understanding or healthy skepticism about investing, it’s time to DIY, kid!
DIY investing is where you, as the parent/guardian/sage, assists your kid in investing on their own. The reason YOU matter in this is because you’re likely over the legal age of 18, and therefore can actually have a brokerage account or other investment vehicle. Unfortunately for kids, they can’t have such accounts on their own…yet.
So, to help your kid DIY, YOU need to get an account for them. The account can be one of several types:
- UGMA/UTMA: there are subtle differences between the two, but both accounts are transferred immediately to the kid once they reach legal age
- Taxable Brokerage Account: this is in the parent’s name, and a kid’s name can be added to the account once they 1) are a legal adult or 2) you trust them to have the funds in the account or 3) never, because it’s your money and you’re just providing an educational example (my FI dad did #3, so it’s ok to be tough)!
- Roth IRA: if a kid is earning documented income (read: modeling career, newspaper route, etc.), then the kid can have an IRA in their name, and can also practice investing within the IRA.
The top 3 places to open such accounts are Vanguard, Fidelity, and Charles Schwab. Honorable mention goes to T. Rowe Price for being the only company that allowed formerly 14-year-old me to have my name on my Roth IRA (next to my dad’s), but I moved that IRA over to Fidelity before blowing out my 18th birthday candles. It’s not me, it’s the expense ratios!
After you choose an account, choose an investment. It can be an individual stock, or a stock and a mutual fund for comparison, or several stocks, or several ETFs, or…you get the idea.
STEP 3: Talk About It Again…And Again…And Again…
Whatever you do for your DIY account, the key thing to do is to keep talking about the investment on a regular basis. Set a reminder on your phone or in your calendar to bring up the investment once a week or month. When your kid brings up the subject themselves, take the time to open up the investment and see how it has progressed. And then start asking questions of your kid, like:
- How does it feel to see the balance change?
- The balance went up/down. How does that make you feel?
- How did the balance change compare to the interest in a plain old savings account?
- What do you notice about the compounding interest?
- Do you want to invest more?
- Do you want to invest in anything else?
As a personal example, when I was about 10 years old, my dad invested $100 in his own portfolio in Disney stock (because I love Disney!). We checked up on the investment once a week. We’d calculate how much the stock changed in that week (say, $1), and then play the hypothetical game of “but what if you had 100 shares of Disney stock, or 1000 shares of Disney stock? You could’ve made $100, or $1000! Then imagine if we bought even more Disney stock with that profit, and you made even more money.” Dad would also emphasize that owning Disney stock meant I owned a small piece of the Disney Company itself. It was the combined effect of owning a piece of such a large company AND making my own money off that piece that left a lasting impression…and got me hooked on investing.
But…what if my kid isn’t interested?
As the old saying goes, not all horses will drink. If you’ve tried to get your kid interested in investing, and they just don’t care, that’s ok. Your kid may simply be too young to understand, or not ready to listen. Drop the subject for now, but set another reminder in your phone or calendar to discuss the subject later. It can be a month later, or six months later, but at least try sometime within the upcoming year. And if it doesn’t work (again), then try again in another six months, and so on. Eventually, one of two things will happen: your kid will get the idea, or they’ll move out of your home!