Teaching Your Children about Investing
It’s never too early to begin teaching your children about money. Children as young as three can begin grasping basic financial concepts, while older kids can handle more advanced concepts than adults may give them credit for. Yet too many parents neglect to educate their children about how money works, which does them a serious disservice. When you teach lessons about money, you give your children a valuable gift that will serve them well throughout their lives and help put them on the path to financial independence. Not convinced your children need to know how investing works? Here are four good reasons to teach your children about investing. Because Someday They’ll Need to Do It on Their Own You teach your children to ride a bike, swim, or safely cross the street because you want to be confident they’ll eventually be able to do those things without you holding their hand. The same goes for investing. Once your children are on their own and have jobs, they’ll have to make decisions about investing for retirement and other goals. If they are armed with good lessons from childhood, they’re more likely to make smart decisions. Because Good Money Habits Start Early Children’s core money habits may be ingrained as early as seven years old. While it may not be reasonable to expect a second grader to understand the intricacies of derivatives and hedge funds (especially when most adults aren’t familiar with those concepts), you can start to teach children about concepts related to investing, like the idea that wealth builds over time. One way to do this is by having children open a savings account that earns interest, or you could reward their saving on your own, perhaps by matching a certain percentage of their savings, just like your employer matches 401(k) contributions. So They Can Make Mistakes Making mistakes is a part of the learning process. Most people have to make their investing mistakes as adults, when losing money often hurts a bit more. But by exposing your children to investing at a young age — and by letting them make their own decisions when it’s appropriate — they’ll learn valuable lessons now, when losing money hurts less. So let your children invest a small amount in that questionable stock. When it tanks as you expect it will, junior will have learned a valuable investing truth. So They Can Start Building Wealth Early Consistent, focused investing is one of the best ways for most people to build wealth. If your children start young, you’ll be giving them an important leg up for their financial future. Even if you aren’t prepared to give children the reins yet when it comes to managing their money, you can show them how you’re giving them a solid foundation by putting their birthday cash and other gifts in an investment account like a Roth IRA. As long as children have earned income from a job, they can put money in a traditional or Roth IRA. Even if it’s just a few hundred dollars, by starting early, their money will have decades to grow. If they continue those good habits as adults, by the time they reach retirement, your children could accumulate significant sums.
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This newsletter was prepared by Integrated Concepts Group, Inc. The opinions expressed in this newsletter are for general information only and are not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. The views expressed are those of the author and may not necessarily reflect those held by PlanMember Securities Corporation. Material presented is believed to be from a reliable sources and PSEC makes no representation as to it accuracy or completeness.