Source: Flickr user Steven Depolo
It's been proven time and time again that those who start investing earlier in life are in a better position to accumulate wealth over the long haul than those who start later in life, but getting children excited about investing can be daunting. We asked three of our top Motley Fool contributors to share with us their single best tip on how to get kids excited about investing. Read on to learn what they suggest.
Selena Maranjian: Teaching young people about investing -- and getting them excited about it and eager to do it -- is an immensely valuable thing to do. After all, kids have more of a key factor for investment success than anyone else: time. It's easier said than done, though, since annual reports and stock charts may not draw their attention as much as skateboards or SnapChat.
It can be done, though. You just need to make the topic as exciting and interesting as possible to them. Thus, you should focus on companies that they know and like. Introduce the subject of investing, explain that they can be a part owner of companies they admire, via stock. Then follow those companies and discuss developments together. If a retailer reports strong earnings, you might discuss how busy its stores have seemed and what it's doing right. If a restaurant announces a menu revamping, discuss whether you think it's making a smart move. Discuss how two companies in the same business are competing, and what strengths and weaknesses each has.
Here are just a few examples, out of many: Sports fans might consider Nike (NKE -0.18%). iPhone aficionados should enjoy following Apple (AAPL 0.64%). Aviation buffs have Boeing (BA -0.76%) or Southwest Airlines (LUV -0.91%). Shoppers might consider Amazon.com (AMZN 1.30%), eBay (EBAY 0.61%), and Costco (COST 1.01%). Coffee enthusiasts might enjoy following Starbucks (SBUX -0.35%), while car fanatics will be interested in Ford (F 0.47%) and General Motors (GM 4.37%). Future farmers might be intrigued by Whole Foods Market (WFM). The list can go on and on.
As you follow companies together, pay attention to struggling companies, too, as they can impart valuable lessons. Is one company having trouble competing with a bigger rival? It could be because the bigger company enjoys economies of scale and a larger distribution network. It can also command better terms from its suppliers and a bigger brand can offer pricing power. You might also introduce your kids to our book, The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of.
Flickr user: theritters
Dan Caplinger: A great way to get your kids excited about investing is to let them participate in a stock-picking contest. The SIFMA Foundation, a nonprofit educational organization affiliated with the Securities Industry and Financial Markets Association, runs a program called the Stock Market Game, in which students have the task of investing $100,000 of game money under real-world conditions in a simulated trading environment. More than 600,000 students between fourth grade and 12th grade participate in the SIFMA Foundation's program each year, and the foundation has found that students who are part of the program do much better both on basic math and on related financial-literacy skills.
Some schools use the Stock Market Game or similar simulations as part of their curricula, but the program is also available to students on their own. For those who get their teachers interested, associated instructional materials can help schools, parents, and students work together to learn more about investing and personal finance in a fun way. By using a program like the Stock Market Game, kids can learn enough about how to manage their money that when the time comes for them to start managing their own real-money accounts, they'll be familiar with the skills they'll need to take full advantage of the opportunity to save and invest.
Todd Campbell: Once you've spent a bit of time making investing fun and had your children compete in a stock picking contest or two, you might want to consider opening up an account for them and letting them learn by doing.
Perhaps it makes sense to put a few hundred dollars aside in your account for them to buy a few companies, or maybe setting up a taxable account in your name and then letting them pick and choose is the right approach. You may also want to consider UGMA or UTMA accounts, which are custodial accounts that are opened in the child's name, and may provide some tax benefits for individuals looking to transfer some assets to their children.
Regardless of how you do it, establishing a real-time portfolio may prove to be the best and most exciting way to introduce the concepts of profit and loss and short- and long-term pain and gain to youngsters.
