4 Ways To Teach Your Children To Invest

Do your children know the value of money? Do they understand what it means to save, or do they spend without thinking? As a parent, you have the important job of showing your kids how to manage money properly, and one aspect of that is teaching them why and how to invest. If you aren't sure how to get started, try a couple of the following ideas.

Talk To Your Kids About Money

Begin by talking to your kids about money. Don't assume that they know anything about earning, saving, spending or investing. They may learn at school, or they may not. Let your kids take part in household budget conversations, for instance. Explain to them how a checkbook or a savings account or CD certificates work. Let them see your investment portfolio, and tell them about it in terms they can understand. The more open you are, the more interested your kids will be.

Set a Good Example

It's also important to set a good example for your children. They will notice if what you're talking about doesn't match what you're doing. If you tell them to save their money and then let your paycheck flow through your fingers, your kids will imitate your actions rather than follow your words. So let your children watch as your deposit money into your savings account, listen as you discuss your investments with your broker or even help you select a new investment. They may learn more by watching then listening, and you'll manage your money better in the long run, too.

Let Your Children Earn Money

For children to start investing, they need to start earning. There's nothing wrong with giving your kids money as a gift on special occasions, but normally, they should work for what they receive. Even young children can do simple chores around the house. They can pick up their rooms, help you with cleaning or wipe the dishes. As kids grow older, they can take on more and more responsibility and earn more accordingly.

You may want to find or make a chore chart with age-appropriate tasks for each child. They can check off tasks as they finish them, and you can check to make sure they've done them well. Remember that kids need to learn quality as well as quantity. Be upfront with your children about how much they can earn by doing their chores, and then follow through.

Older kids might start working outside your home by babysitting, mowing lawns or running errands for neighbors. Teens may be able to handle a part-time job as long as it doesn't interfere with their schoolwork. The most important thing is to teach them that they must usually earn their money through hard work and responsibility.

Give Kids Investing Experience

Of course, the other part of the equation is to set rules for what your kids do with the money they earn. Let them spend part of it if they wish, but put strict limits on this. You should teach them how to save. A basic savings account is a good place to start. Later, when your kids have saved enough, you might give them a chance to invest in other ways. Many companies offer accounts and products designed specifically for young people, so talk to your broker about these options. Start small and safe with your kids. You don't want to take many risks and turn them off of investing. Over time, they'll gain experience and grow in judgment.

If your children learn how to earn, save, manage and invest their money now, they'll grow into responsible adults later. So start teaching them right away. You might find that you'll learn plenty along the way, too.