How Smart Parents Can Teach Their Teens About Stock Trading

Despite what you may think the teenage years are not too early to begin teaching your children about stock trading. In fact, when kids learn at a younger age, they will grow up savvy and more financially prepared. As well as giving kids gifts at Christmas time, parents could start to think business-wise too.

What about teaching your kids about investments? There are already several banks helping parents to enlighten their kids on the mysteries of the stock market. Kids can develop financial literacy through creative tools as they learn to invest, save, spend, and donate.

As a smart parent, your aim is always to raise your kids as responsible adults. It is paramount to start mentoring kids as early as possible, then by the time they get to 21 they could be millionaires!

Children learn financial skills from their parents, relatives or friends either directly or through eavesdropping on everyday conversations. You might not be all that into dividend stocks and you don't understand much about them, so read on for our guidance on what and how to share financial guidance with your kids.

Here are tips on how to start mentoring your children on stock trading:

1. Don't Begin in the Middle

When teaching kids about money, start at the beginning. Begin with allowances, the importance of giving, spending, and saving. You could also teach your kids about the household budget and let them help with the grocery shopping.

Consider starting with the groceries. If your young ones can relate products to the importance of money, you'll know that you are on the right track for teaching them about investments.

2. Invest Real Money on Individual Stocks

Even though there are numerous simulation games, if you can assist the kids in investing real money, and can risk £50-100, do it. There are plenty of online firms that offer accounts where minimum balances do not apply.

Using real money will help kids learn that stock investing is about risk toleration and that without being brave, we can't earn any returns.

Shares declining by 20% or 30% is a learning opportunity for kids to appreciate the fundamentals of diversifying investments. The primary purpose of doing this is to ensure that kids realise that investment in individual stocks isn't far from gambling. Hence, when they are adults, they should direct their savings to low-cost funds that buy numerous shares.

3. Keep Score

Older kids are much more ready to give index funds a try. The fact is that the index mutual is capable of tracking the whole stock market segment.

Maybe kids should begin by investing in single stocks for more excitement. And join them in keeping track of their investments as they go up and down.

4. Kids With Similar Interests Could Team Up

Cousins and siblings could establish a club to invest, or your kid may consider creating a club at school. 

Investment clubs consisting of like-minded young investors allow them to share and discuss business ideas. They get to learn about various companies and deliberate on the most suitable move.

5. Direct the Returns towards a Valuable Thing

Consider creating a retirement savings for the kids immediately. They can start earning real and taxable income. Help kids to understand the amount of money that can be made at an interest of 5% yearly for 50 years.

6. Embrace Giving

Mentor your kids to learn the art of giving back to the community just like the most outstanding entrepreneurs do.

They should learn to save a portion, while the other fraction gets donated to a charity or other worthwhile cause.

7. Pass Gifts to Your Kids

Consider passing along some financial gifts your parents gave you to your offspring too. You can mentor them into stock trading through a reinvestment plan.

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