Children start to hear about the stock market early in life partly from seeing it on the news, school, or the internet. Since it is to do with intricate financials, some find it hard to comprehend the topic. Many adults turn to TOPS stock for an evaluation of the companies trading in the stock exchange. Teaching your children how to invest is vital as it empowers them to be better financial planners. Below are some of the ways older teens can learn about the stock market.
- Books
Expose the child to books that talk about the stock market. Remember, it is a topic that teens with a passion for money matters can understand easily. Some would prefer to read John Grisham novels than go through financial newsletters. Reading is a great way to learn about the stock market as it will help the child internalize the information contained in the books.
Some of the best reading materials to kick start their interest in the stock market includes:
- Yummi Yoghurt: A First Taste of Stock Market Investment by Lord Lee of Trafford
- Billionaire Boy by David Walliams
- Poke Your Child’s Interest
Children learn through seeing and doing, no matter their age. You can begin by showing them the stocks that you own. Introduce them to popular companies that trade in the stock market. For instance, brand name companies such as Nike, Apple, McDonald’s, and Boeing can be intriguing to them. You can evaluate the company’s investor relations page together with your child to discover what it makes, the number of its employees, and the sales margin.
- Teach Them How to Be Independent
Let the child choose a company they are interested in. If you have the money needed, buy shares in the stock. Every week, take time to check the investment to see how it rises and falls. Alternatively, you can track stocks for fun through a model online portfolio. The beauty of buying the shares with them is that they will learn about market fluctuations. The information will come in handy when they grow up as they can make better money investments.
- Teach Them Basic Concepts
You can start teaching your children basic finance concepts to conjure their curiosity. Start by explaining the difference between stocks and bonds. They need to know that the two terms are different from the ordinary savings. Additionally, let them know that stocks are high risk and unpredictable. It is just like gambling in a casino. The chances of making a profit are always fifty-fifty. You should also indicate that they can have a substantial return on investment or make losses. It all depends on the value of the stock going higher or lower.
They also need to know that, unlike stocks, bonds are low risk with a low return on investment. You can also highlight the relationship between reward and risk. Additionally, let them be aware of when they can make a profit and loss. As a parent, you should explain how the stock market operates. Also, tell them the process of investing.
- Watch TV Shows and Business News
Stock market news can be a good way for the child to monitor the shares and know when to invest. Therefore, they can constantly follow the progress of their favorite company. Below are some of the TV shows that they can watch to equip themselves with knowledge about trading.
- Mad money by Jim Cramer offers you information on how to analyze stocks
- Your Money by Christine Romans airs on CNN and talks about several issues in finance
- Squawk Box airs on the CNBS show bringing in panelists who offer insight on several matters like the stock market
- Answer Questions
Be ready to answer questions like, “Why do people buy stocks?” Interested teens would ask the specifics such as, “How much are stocks,” and, “Where do I buy them.” It is okay to explain everything about stocks as you will be empowering them on how to invest in stocks. Use simple examples to explain to them the basics of stock investment. Have reference material to back up your explanation.
If you want your child to learn about the stock market, you must use several strategies to help them grasp it. Knowledge is power, and helping them in their early adulthood can help them make better financial decisions. They must be ready to take risks so that they can gain profits.
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FAQs
A stock is a share in the ownership of a company. A bond is an agreement to lend money to a company for a certain amount of time. Companies sell securities to people to get the money they need to grow. People buy securities as investments, or ways of possibly earning money.
How do you explain stocks to a 12 year old? ›
A stock is a share in the ownership of a company. A bond is an agreement to lend money to a company for a certain amount of time. Companies sell securities to people to get the money they need to grow. People buy securities as investments, or ways of possibly earning money.
What is the best way to learn the stock market? ›
Continuous learning: Expand your knowledge by reading financial articles, stock market books, and website tutorials. Tune into Bloomberg TV and stay informed about market trends and economic indicators that could affect your holdings. Adapting to new information is essential for long-term success as a trader.
How to teach investing to high school students? ›
To help solidify the basics of investing, try giving your teen some companies and industries to watch and research. Help them make sense of what they discover along the way. If you're comfortable doing so, think about letting your teen monitor your investments with you.
How to teach children about the stock market? ›
Start by teaching them the basics of risk versus reward, stocks and bonds, and profits and losses. If you own stocks, explain why you chose to invest in those companies and consider including your child in keeping an eye on the stock and company news.
How do you explain stocks for dummies? ›
The stock market is really a kind of aftermarket, where people who own shares in the company can sell them to investors who want to buy them. This trading takes place on a stock exchange, such as the New York Stock Exchange or the Nasdaq.
How do you analyze the stock market for beginners? ›
There are two primary methods of analyzing stocks: technical analysis and fundamental analysis. Technical analysis shows how a stock's price swings, but doesn't explain why. Fundamental analysis seeks the why—it wants to draw a conclusion about the company's prospects.
What are the basics of the stock market? ›
It's a network of all-stock trading where investors and traders buy and sell stocks. These trades determine stock prices, reflecting the company's perceived value and market conditions. The stock market is also where companies raise capital and from which investors can grow their wealth.
How do stocks work for beginners? ›
Investing in stocks means buying shares of ownership in a public company. Those shares are called stock. If a stock you own becomes more valuable, you could earn a profit if you decide to sell it to another investor. Most people invest in stocks online, through a brokerage account.
How to start investing at 11 years old? ›
To start investing in stocks on their own, your kid will need a brokerage account, and they must be at least 18 years old to open one. They can start earlier than this, but they'll need a parent or guardian to open a custodial account for them. What is a custodial account?
It is generally impossible for minors to open their own brokerage account, but custodial accounts and joint accounts allow young people to begin their investing journey with varying amounts of adult supervision.
How do you explain investing to a child? ›
Keep it simple. The best way to get kids interested in investing is to speak their language. Start by explaining that investing is a means of using your money to try to create more money.
What is the 50 30 20 rule? ›
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
What is the most effective method to teach financial literacy? ›
Give Students Real-Life Scenarios to Solve
Providing real-life scenarios to students is an excellent way to teach financial literacy. You can help your students understand how to calculate taxes, create a budget, or develop a purchase plan.
What are the 4 steps to financial literacy? ›
Key steps to attaining financial literacy include learning how to create a budget, track spending, pay off debt, and plan for retirement.
What are stocks in simple terms? ›
A stock represents a share in the ownership of a company, including a claim on the company's earnings and assets. As such, stockholders are partial owners of the company. Fractional shares of stock also represent ownership of a company, but at a size smaller than a full share of common stock.
Should a 12 year old invest in stocks? ›
Investing for kids
If they're willing to let their money remain invested for several years, they're likely to see a nice return on their initial investment. Seeing their money grow can encourage them to be good savers and investors as adults.
What is stock market in simple words? ›
Definition: It is a place where shares of pubic listed companies are traded. The primary market is where companies float shares to the general public in an initial public offering (IPO) to raise capital.
