Thrifty Thinking: How to Raise a Financial Whiz Kid

Getting kids started in the stock market doesn’t have to be difficult

While the stock market has been performing well recently, about half of Americans are not benefitting because they have not invested. According to a Gallup poll, in 2016 only about 52 percent of adults in the U.S. owned stock – including individual stock, mutual fund or self-directed 401(k) and IRA investments. Ten years ago, that percentage was closer to 66. Missing out on current market gains does not translate simply to lost profit. It can also mean that more children are not being taught about investing through their parents’ experiences. 

“Over the years I have heard again and again from people that investing is too scary, too risky, too confusing and too expensive for them to get involved in,” said Gregg Murset, CEO of BusyKid and a Certified Financial Planner. “But it simply is not true and investing today is so easy a kid can do it.”

Murset recommends that parents start off by teaching their children the value of a dollar, work ethic and talk openly with them about household finances instead of treating it as a taboo topic. He says parents should:

• Use teachable moments: Every day parents face numerous financial decisions that could be use as a "teachable moment” for children. The next time you are grocery shopping, show your child how to compare prices and brands. If you’re paying bills, let your child sit with you and see how you manage money.  
• Look differently at chores and allowance: While a majority of parents agree that kids should be doing chores and receiving an allowance, some parents feel money shouldn’t be the reason kids help around the house. It’s those parents who should look at chores and allowance differently. Think of it as a child’s first job and the first chance to teach them everything they need to know (work ethic, direct deposit, budgeting, opening bank account, taxes, etc.) before they head off to get a real job someday.  
• Learn as a family: Many parents don’t like to talk to their children about money because they believe they aren’t knowledgeable enough. If you are one of these parents, jump in and learn with your children by making an appointment at your bank to talk to a wealth planner, watching financial news shows and testing the investing waters.

Dan Schatt, CCO of Stockpile, agrees that parents should be proactive in getting their kids started at a young age. There are options for starting small, and patience is the key.

• Take the long view: Despite booms and busts, remember that over the last 100+ years, the stock market has historically performed better than bonds, real estate, or cash sitting in a bank account.  $1,000 invested in 1900 would have been worth close to $20 million in 1999! 
• Diversify investments: It’s tempting to put all your money in one investment, but diversification is an important principle in any portfolio you decide to build.  Consider investing in several stocks or an index fund, such as the S&P 500.  A fund allows an investor to have exposure to a wide variety of quality stocks.
• Spend time on research: Not only is it important to research the stocks you or your kids are considering, a good investor will also pay attention to company news to recognize signs of growth or failure.  Also investigate options for making your investments.  Brokerages like Stockpile give you the ability to invest small dollar amounts through fractional shares, perfect for kids and teens just starting out, while banks and investment houses have much higher buy-in requirements and specialize in clients with more complicated portfolios.