Note: We receive a commission for purchases made through the links on this site. Our sponsors, however, do not influence our editorial content in any way.
Teaching your kids the basics of money and finance while they are young is always a wise idea. From starting a humble savings account to learning how best to invest their money, an early education in finance will help them appreciate the value of a dollar and help them to better prepare for a strong financial future.
Getting kids started with investing does not have to be overly difficult, nor do they need a lot of money to invest. After all, the main point is to teach them first about investing, and not necessarily to amass a large fortune at such an early age (although that would be nice, of course!)
Essentially, kids investing early grow up to be savvy investors in the future, and all you need to start teaching this important life lesson is a piggy bank or similar vessel that will allow children to put money into three separate compartments. Even three separate envelopes or folders will do.
The three compartments will serve to hold money for savings, spending, and investing. Getting kids into the practice of dividing up their money sets the stage for budgeting. In turn teaching them that not all money earned is to be used for spending.
At this point, you should also explain the difference between saving and investing, and why both are important. Obviously, getting into deep detail about certain types of stocks or funds can be confusing for children, so keep it simple.
Explain that money that is put into savings is meant to be used for emergencies or for a large purchase that requires time to accumulate enough funds for it. Likewise, you can explain that investing is somewhat similar to saving, but instead of spending it at a later date, it is used to make more money that can be added to savings.
You can use stories or visual aids to help you get the point across. You can show children how their money will grow by using play money. Show them expected earnings and accumulated savings that can be theirs over a period of a few months or a year, and they will likely quickly grasp the concept as well as become motivated to save and invest.
There are quite a few apps that help kids learn about money, saving, and investing. There are even some that enable kids who earn money doing chores or other tasks to easily save and invest a portion of their earnings.
Some recommended apps to check out include:
Once you feel that your children have a decent grasp of investing, you can get them started with some stocks. Some financial experts suggest giving your kids a starter pack of stocks. This includes a few shares of about 10 stocks. Those that offer different dividends and further teach them about important aspects of investing. Such as compound interest.
Once your child is actually earning a regular income, they will be exceptionally well-prepared to handle their money wisely.