Making Investment Lessons Fun
Years ago, I read a cute question by someone whose name I can no longer recall. That story ended with a question that went like this, “How many millionaires do you know who made their wealth with bank savings accounts? Enough said.” The author was making a good point, you are not going to build wealth for yourself at bank interest rates for savings deposits or even CDs. That isn’t investing, it is saving. Actually, since bank interest rates are below the rate of inflation, an ordinary savings account is a way to store money while losing money. Instead of losing money, you want your money to increase.
You should want your children to begin to understand this concept while they are very young. Dave Ramsey of Financial Peace University cites multiple studies in which children have formed their basic thought patterns about money by age 7. That means the children were learning about money long before age 7 from someone or something. In the modern American home, that means their basic concepts of money were probably learned from the TV. What a terrifying thought!
Can’t we do better than that? Of course we can.
Rather than give money or gift cards to our young nephews and nieces for Christmas, we chose to give U.S. Savings Bonds. While those are not the highest yielding investments, they yielded one surprising result. One of those nephews watched and charted the increase in value of the bonds and then cashed them in to re-invest them and ultimately became an investment adviser! Even better, he is now our investment adviser.
How can you teach investing, especially with small children? I wasn’t taught; instead I had to learn the hard way as an adult. Before I knew that I needed an investment adviser to guide me, I had an investing style that represented the investing skill and style of far too many Americans; “buy high and sell low!” If only I had learned more as a child.
One idea I have seen is interesting and promoted by Give a Share which lists 120 stocks of which you can buy just one share, either for yourself or as a gift to a child. As of the writing of this article, the options include AIG at $96 per share, Bank of American at $78 per share, and Coca-Cola at $97 per share. You can even inject a bit of politics and buy a share of Fox Corporation at $82 per share or the New York Times at $76 per share.
Give a Share promotes their sales colorfully with humorous and meaningful comments like the following:
Top 10 Stocks to Give
• #1 Disney Stock WORLD’S YOUNGEST SHAREHOLDER!
NOW YOU OWN ONE SHARE OF DISNEY
• #2 Harley Stock RIDE LIKE YOU OWN THE COMPANY
BECAUSE NOW YOU DO!
• #3 Nike Stock AS A MATTER OF FACT
I DO OWN THE COMPANY!
BTW LEBRON WORKS FOR ME
It isn’t hard to see the many lessons that can be taught as the share values go up (prayerfully) more than down. Annual reports and, for some, dividends create a complete new set of lessons. And be honest, isn’t that a better gift than a toy that gets broken within a month and teaches nothing meaningful. This is a gift you can let the child help select. In the process of talking about that selection, I wouldn’t recommend delving into price/earnings ratios or balance sheets with most 5-year-olds, but you can discuss good and bad choices and start to lay the foundation for the future.
You can also introduce the idea of Godly investment choices and steer your child away from investments in alcohol, marijuana, or other spiritually questionable options.
Through all of this process, you may end up teaching a lesson without ever saying the words “risk and reward” specifically because every choice should consider risk vs. reward. Risk always is there for any investment. Some risks are greater than others, to the limit that some are just bad risks. Rewards are anything but guaranteed.
Over time, you teach about stocks, bonds, mutual funds, ETFs, profits, loses and even taxes! One hope is that eventually your child will want to experiment with a purchase of his or her own, something far better than some experiments children make! They can even learn about and invest in companies they have heard about, such as Disney or McDonalds. This also teaches patience. See Part 5 in this series of articles.
How early should you start? Melanie Mortimer, past President of the Securities Industry and Financial Markets Association (SIFMA) Foundation, said “By starting as early as 3-years-old, your kids can grow up to be part of a more prepared and financially savvy generation.” While that may seem early, do not forget that by age 7 most children have settled on their basic thought patterns about money.
If you don’t have the money to actually invest, try virtual investing. Give your children an amount of virtual money that can be “invested” in virtual stocks in a virtual stock market. You can track real world rises and falls, profits and losses, just without the real-life dollars. Then have your children choose a stock or stocks they know about or say they like (they may choose it from what they like to eat or wear). Then you can track the stock’s performance monthly. They will have a chance to ask why the price goes up or down, and they get to see the enormity of the market of products, learn about competition and even marketing. Then they can learn diversification by buying additional shares in different investing sectors, or maybe even international stocks. At this point, world trade and international politics can become a part of the lessons.
It is easy to see that the potential lessons and the blessings are endless.
One of the rages of the younger generations is “crowd-funding.” Well, there is now an opportunity for real life crowd-investing. Lending Club allows small investors to be a part of small lending. It requires an initial investment of $1,000 and the risk is extremely difficult to measure, but it is something to at least consider once your children have saved enough to start. Being able to receive payments, watch success and suffer through failure is important – that is called life. I would rather children experience a loss young and earlier in smaller amounts than get burned with a large loss later because they really did not understand risk.
Wrapped up in all of these lessons are opportunities for generosity and for recognition of God’s part in everything we do.
While you are at it, check out our previous articles on Teaching Money to Children and Youth, Parts 1 through 5, all located at this link, www.idlewildfoundation.com/for-parents/. Help us be a resource to help you. Try this and let us know how it works. We would love to hear from you.
About the Author
John Campbell has retired from a 40-year legal practice as a trial attorney in Tampa. He has served in multiple volunteer roles at Idlewild Baptist Church in Lutz, Florida, where he met Jesus. He began serving as the Executive Director of the Idlewild Foundation in 2016. He has been married to the love of his life, Mona Puckett Campbell, since 1972.