Learning to save and invest is not much different than learning to throw a baseball, play piano or be polite. Teaching the skills to help your children (and you) build wealth is not an expensive proposition…but failing to teach is.
Getting schooled. Every year, parents pay for their kids to be more competitive – in music, athletics, dance, art, academics and more. They shell out thousands to build up these skills. Yet most will spend practically nothing to teach their kids about money.
Learning the skill to build a nest egg doesn’t require fancy equipment, new uniforms, special shoes or lots of money, however, it does mean learning how to invest. You can’t just park your hard-earned cash in the bank and expect an ordinary savings account to do the job. It won’t grow quickly enough today – you have to invest in order to grow that nest egg.
It’s never too soon to make your first investment. But many of us are reluctant to start, because we
- think an investor needs to have lots of money,
- wonder if there will be a better time to invest,
- don’t know everything about investing,
- are afraid we’ll make a mistake.
Whether it’s real estate, stocks or another type of investment, the key is understanding risk vs. reward: typically the better the reward, the greater the risk. Let’s look at investing in stocks…
In the last 100 years, the stock market has been a good place to invest and reap rewards. True, the stock market can be a risky place, and some investments are more risky than others. (But there is also risk in driving a car, flying, starting a business, farming, choosing a spouse, having children.) In fact, the biggest risk of investing can actually be financial ignorance or procrastination.
Investing needn’t be a boring or complicated task. Even children can learn the basics. Here are four tips to get started:
- Invest in learning to invest. Make it a habit to build your financial vocabulary – learn the lingo! You don’t need to spend hours of drudgery every week to boost your financial know-how. How about 10-15 minutes? Read some financial publications. Use the library. Talk with other investors. Join an investment club.
- Practice what you learn. Just like good baseball players, good investors don’t swing at every pitch and don’t get a hit with every swing. Practice makes perfect, so practice. It’s okay to make mistakes…and most investors do. Concentrate on investing in what you understand, not what others say are great investments.
- Start small. We don’t expect babies to run before they walk, and young kids start with T-ball games before moving to the fast-pitch league. Becoming a good investor is a series of learning steps, too. Make progress on a small scale first. Dividend Reinvestment Programs (DRIPS) are an excellent learning tool. Check out dripinvestor.com.
- Stay with it. Develop the habit of investing often and continuing for a lifetime. Ordinary people in ordinary jobs can—and have—amassed fortunes by investing regularly. You can too.
For more about learning to invest, check the Money Godmother site for free printables to use with your kids.