Many parents shy away from discussing finance with their kids. Yet, children must learn to invest in daily life. Here is how to teach kids the value of investing.
Start with yourself: Do you want to encourage your child to invest? You will have to be a role model. If you have never thought about investing earlier, start now. Seek help from a professional or an acquaintance to begin your own investment career.
Talk about savings: Savings are a stepping stone to investment. Show your kids how saving is useful. Share stories about how you saved coins as a kid to buy a set of toy cars. Give your children piggy banks, where they can deposit their savings. Reward them with interest. For example, promise to pay them Rs X as a bonus on every Rs 100 they save. Are your children older? Ask them to save and contribute towards the cost of a cricket kit or dancing shoes.
Talk about banking: Investing is not just about stocks. Introduce your child to banking. Open a savings account that they can operate jointly with you. Explain the concept of compounding once they learn about compound interest in school. Talk about how they can benefit by reinvesting the interest earned on their bank deposits. Share information about other investment tools, like fixed deposits, insurance schemes, and child plans.
Talk about stocks: This might seem hard but your child can pick it up faster than you think. Begin by explaining what a stock exchange is and how stocks are bought. For example, show them a cake, a pie, and a pizza. Say that the table is where the trade will happen. The meals are three big companies, each owned by a different family member. Tell your kids that they could pick one or more shares from the meal they like the most. For this, they will have to pay the respective family member.
Hand over the reins: Practice is important once you have explained the basics. Ask your child how they would invest a certain amount to meet their education goals. You could also support them by getting them to invest a small amount in shares of a company or in a fixed deposit at a bank of their choice. This will introduce them to risk assessment in the real world.
As a parent, keep emphasizing the value of investing through regular conversations. In time, your kids will make saving and investing a regular habit. And this is how you teach kids the value of investing.
Source : Yahoo