Children start to hear about the stock market early in life partly from seeing it on the news, school, or the internet. Since it is to do with intricate financials, some find it hard to comprehend the topic. Many adults turn to TOPS stock for an evaluation of the companies trading in the stock exchange. Teaching your children how to invest is vital as it empowers them to be better financial planners. Below are some of the ways older teens can learn about the stock market.
- Books
Expose the child to books that talk about the stock market. Remember, it is a topic that teens with a passion for money matters can understand easily. Some would prefer to read John Grisham novels than go through financial newsletters. Reading is a great way to learn about the stock market as it will help the child internalize the information contained in the books.
Some of the best reading materials to kick start their interest in the stock market includes:
- Yummi Yoghurt: A First Taste of Stock Market Investment by Lord Lee of Trafford
- Billionaire Boy by David Walliams
- Poke Your Child’s Interest
Children learn through seeing and doing, no matter their age. You can begin by showing them the stocks that you own. Introduce them to popular companies that trade in the stock market. For instance, brand name companies such as Nike, Apple, McDonald’s, and Boeing can be intriguing to them. You can evaluate the company’s investor relations page together with your child to discover what it makes, the number of its employees, and the sales margin.
- Teach Them How to Be Independent
Let the child choose a company they are interested in. If you have the money needed, buy shares in the stock. Every week, take time to check the investment to see how it rises and falls. Alternatively, you can track stocks for fun through a model online portfolio. The beauty of buying the shares with them is that they will learn about market fluctuations. The information will come in handy when they grow up as they can make better money investments.
- Teach Them Basic Concepts
You can start teaching your children basic finance concepts to conjure their curiosity. Start by explaining the difference between stocks and bonds. They need to know that the two terms are different from the ordinary savings. Additionally, let them know that stocks are high risk and unpredictable. It is just like gambling in a casino. The chances of making a profit are always fifty-fifty. You should also indicate that they can have a substantial return on investment or make losses. It all depends on the value of the stock going higher or lower.
They also need to know that, unlike stocks, bonds are low risk with a low return on investment. You can also highlight the relationship between reward and risk. Additionally, let them be aware of when they can make a profit and loss. As a parent, you should explain how the stock market operates. Also, tell them the process of investing.
- Watch TV Shows and Business News
Stock market news can be a good way for the child to monitor the shares and know when to invest. Therefore, they can constantly follow the progress of their favorite company. Below are some of the TV shows that they can watch to equip themselves with knowledge about trading.
- Mad money by Jim Cramer offers you information on how to analyze stocks
- Your Money by Christine Romans airs on CNN and talks about several issues in finance
- Squawk Box airs on the CNBS show bringing in panelists who offer insight on several matters like the stock market
- Answer Questions
Be ready to answer questions like, “Why do people buy stocks?” Interested teens would ask the specifics such as, “How much are stocks,” and, “Where do I buy them.” It is okay to explain everything about stocks as you will be empowering them on how to invest in stocks. Use simple examples to explain to them the basics of stock investment. Have reference material to back up your explanation.
If you want your child to learn about the stock market, you must use several strategies to help them grasp it. Knowledge is power, and helping them in their early adulthood can help them make better financial decisions. They must be ready to take risks so that they can gain profits.
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FAQs
For older children, you can also explain how the value of stocks is relative to the value of the company you invest in. This means that if a company makes a lot of profit, the company value will increase and the share value will increase too. This is how money is made on stocks.
How do you explain stocks to a 12 year old? ›
For older children, you can also explain how the value of stocks is relative to the value of the company you invest in. This means that if a company makes a lot of profit, the company value will increase and the share value will increase too. This is how money is made on stocks.
How to explain investing to a 6 year old? ›
Explain the basics of investing
To start, begin with the basics of investing, including explaining that a stock — or share of a company — allows them to have ownership in that company. If you have an investment portfolio, show your child how it's grown over the years through compounding returns.
What is the easiest way to explain stocks? ›
A stock represents a share in the ownership of a company, including a claim on the company's earnings and assets. As such, stockholders are partial owners of the company. When the value of the business rises or falls, so does the value of the stock.
How to teach investing to high school students? ›
Here are some tips to help teach healthy investing habits.
- Teach teens the basics of investing. ...
- Start with companies your teens know. ...
- Stress the importance of diversification. ...
- Teach teens the benefits of a "buy and hold" strategy. ...
- Teach patience: Show teens how compounding works over time.
Start by teaching them the basics of risk versus reward, stocks and bonds, and profits and losses. If you own stocks, explain why you chose to invest in those companies and consider including your child in keeping an eye on the stock and company news.
How do you explain the stock market to a 10 year old? ›
A stock exchange, or stock market, is a system for buying and selling securities, or stocks and bonds. A stock is a share in the ownership of a company. A bond is an agreement to lend money to a company for a certain amount of time. Companies sell securities to people to get the money they need to grow.
What is the simplest explanation of stock market? ›
The stock market is where investors buy and sell shares of companies. It's a set of exchanges where companies issue shares and other securities for trading. It also includes over-the-counter (OTC) marketplaces where investors trade securities directly with each other (rather than through an exchange).
What is the stock market for dummies? ›
The stock market is where shares of companies and other financial instruments are bought and sold. It's a network of all-stock trading where investors and traders buy and sell stocks. These trades determine stock prices, reflecting the company's perceived value and market conditions.
What is the basic knowledge of stocks? ›
Stocks are a type of security that gives stockholders a share of ownership in a company. Companies sell shares typically to gain additional money to grow the company. This is called the initial public offering (IPO). After the IPO, stockholders can resell shares on the stock market.
They can start earlier than this, but they'll need a parent or guardian to open a custodial account for them. What is a custodial account? A custodial account is a type of investment account that's managed by a parent or guardian who opens it for a minor before the age of 18 (or 21, depending on the state.)
Can 10 year olds invest in stocks? ›
Yes, you can start an investment account for your child. Many stock brokers offer custodial accounts, a type of investment account that a parent or guardian can open for a child. You can use a custodial account to make investments for your child, and when they turn 18, control of the account transfers to them.
What age should you teach your child about investing? ›
Our Life Skills curriculum designer and learning coach, James McManus, says "Getting your kid into investing is simple: start early and make it a habit! The right time to start is whenever they start to ask you about money, and 11 or 12 years old if they haven't started asking."
Should a 12 year old invest in stocks? ›
Investing for kids
If they're willing to let their money remain invested for several years, they're likely to see a nice return on their initial investment. Seeing their money grow can encourage them to be good savers and investors as adults.
What is stock market in simple words? ›
The stock market is where investors buy and sell shares of companies. It's a set of exchanges where companies issue shares and other securities for trading. It also includes over-the-counter (OTC) marketplaces where investors trade securities directly with each other (rather than through an exchange).
How to do stocks at 12? ›
If you are a minor, you can make investments only under the supervision of your parent through a custodial brokerage account. You parent will have to sign you up for a custodial account offered by an online broker.
