Teaching Kids about Investing in the Stock Market
There is something about the New Year that encourages people to take stock of their financial standing and think about their futures. Maybe it is having to do the taxes! The Costco Connection published an interesting article this month by Jim Cramer, the host of "Mad Money" on CNBC and "Real Money," a radio program. Cramer suggests that "investing in stocks will make your children much larger profits than if they had kept their money in the bank." This surprised me, but I am a little risk-avoidant.
Another surprise: the article also suggested that teaching children how to invest was more important than teaching them to stay out of debt or to budget. According to Mr. Cramer, starting a bank account is good, and kids will love the concept of interest, or free money. However, he feels that the message will be stronger if the profits are large enough to really impress them. Investing in stocks also lets kids learn about losing money. This sounds a little painful to me, but it is a lesson we all learn sooner or later.
I do agree that starting young provides a valuable lesson in investing and that kids need to be financially savvy. According to this article, the key to getting stocks to come alive for children is to get them involved with something they know and can get excited about. Have them identify a brand or company they know and buy even one share of that stock. Then help your children chart the earnings or loses of that stock, over time. Have family members give stock instead of savings bonds to kids for holidays.
If you are interested in learning more about teaching kids about money, you can check out one of the many commercial Web sites out there. I found one from PBS that includes a lot of great advice. Good luck!
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