I feel this is a really important question as learning is a lifelong practice. And, investing well over a lifetime is about learning the basics so that over time you make increasingly better decisions.
I’ve found the best way to get children interested in stocks is to get them a stock (or a fractional share) in a company that they’re familiar with.
I’ve bought kids shares in Apple and Amazon, and have taken my kids into their stores, and mention it to them when we receive some thing from Amazon. Their response is fascinating… because they ask to go to their stores and are learning to understand that they own a (very) small piece of these companies.
Let me answer another couple of questions:
- How do you teach them something useful, as well as getting them interested in stocks?
- How do you actually do it? That is, how do you buy them a stock?
For #1 — I learned about dividends early on, and thought about it as “money making money”. Back then buying stocks was expensive, hard, etc. (It was the 80’s).
I’ll never forget getting the quarterly statements in the mail showing me the amount I “earned” (it was pennies — I had five shares in a utility — maybe $100 worth of shares)… but the idea that my money could make money stuck with me deeply.
Then, TEACH THEM ABOUT COMPOUNDING by reinvesting dividends and show them the dividends increasing each quarter. Even if it’s small, you can show them percentages… they might get a 10–15% raise each year. It takes time, but you will teach your children well.
Remember, Albert Einstein was rumored to have said that compounding is the 8th wonder of the world. Whether it’s true or not that he said it, the sentiment is absolutely correct. And, when teaching kids, this is how they can learn to understand the value of time on their portfolio.
For #2 — and I have no interest in this company other than I love the implementation, check out Stockpile. It’s an app / website that has a great custodial implementation. For teaching them, your kids can have their own accounts, track their own stocks, but not have purchasing power. You can buy for them… and they can have real ownership, but without having to give them control. If you go to a traditional brokerage, the account is in your name… which is OK too… but you’re giving them access to the account, or not. You can’t give them access as the minor.
Other companies are either allowing fractional share purchases or soon-to-release the ability to do so:
- Fidelity (only from their mobile app)
- Schwab (just announced)
If you agree with this, and want to see some of the simple ‘analytics’ or ‘metrics’ that get people excited read this post. What Should You Measure to Help You Get Started Investing? — 🐘💵
These metrics will help people have fun investing… instead of thinking of it as a chore, or doing it because them must. Fun is a great, and under-used tool for teaching kids about investing.