December 2, 2022

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World Finance Reviews

How your kids can learn ‘life lessons’ from investing and trading

Trading stocks has become much easier for young traders in the last few years – thanks to fintech apps like Robinhood and Greenlight.

Robinhood, for example, drew unprecedented levels of young, first-time traders to the stock market during the pandemic.

The rise of such trading platforms that allow kids to buy stocks can be viewed as “a great opportunity” to get them “curious and excited about personal finance,” said Thomas Henske, a certified financial planner.

As the markets continue to be more and more accessible to everyone, what can kids gain from learning to invest and trade? CNBC Make It finds out.

Start learning young

The earlier a person understands how to invest, the better chance of that person investing in the future.

Tania Brown

Certified financial planner

Still, industry experts who spoke to CNBC Make It said it will be beneficial for kids ages 8 and up to be exposed to the stock market.

“Teaching the basics of investment exposes your kids to understand how businesses work, [how to] grow money, and hopefully, … how to make wise investing decisions,” said Tania Brown, a certified financial planner and financial coach at SaverLife.

Here’s how retail investors are hedging against the market volatility

Children also have a “valuable asset” that adults do not — and that’s time, added Jerremy Newsome, the CEO of Real Life Trading, which teaches kids, parents and adults about the stock market.

“Children, and even adults, are learning about stocks and investing way too late. I have heard so many people telling me they wished they learned when they are younger,” he said.

Understand ‘risk and reward’

Kids can learn about risk, reward and how to think long-term through the stock market, said Thomas Henske, a certified financial planner.

Maskot | Maskot | Getty Images

“When you make a trade — it doesn’t matter if it’s real money or fake money – and you lose, there’s a certain feeling that happens. You get upset or angry or annoyed or frustrated,” said Newsome.

This gives children the chance to learn how to recognize and understand emotions and then “shift” to a more positive state, building “emotional intelligence.”

Newsome added that learning how to trade stocks is also a way for your children to better “practice math” and see it incorporated in real life.

“When kids are going through school, they don’t know how the math they’re learning is going to help … or benefit [them].”

Stocks can be a metaphor for life in several respects. Life is not a straight-line.

Thomas Henske

Certified financial planner

“In the stock market, you don’t need to be a math expert by any means, but you generally do have a good understanding of percentages, decimals, multiplication, addition, subtraction — those really core math principles are very prevalent in trading,” said Newsome.

Investing for the future

There is “power” in starting early and it is important to keep “the end in mind” when teaching children how to invest, said Thomas Henske, a certified financial planner.

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He pointed out that investing is important for those trying to achieve their retirement goals. 

“Show me someone who is an amazing saver and only gets 5% on that savings, and I’ll show you someone who has a better financial path … [and] gets 10% on their money.”

Learn to save first

“When the topic of investing comes up, parents often times get excited and want to jump right into teaching kids to buy stocks. In my opinion, that is not the place to start,” he added.

“What good is teaching them to become a master investor if they can’t even save any money? Last time I checked, a 20% rate of return on $0 is $0.”

Henske’s advice to parents is to expose kids to the topic of investing early, but “don’t be discouraged if they don’t start being receptive to those lessons until they hit high school.”

How should kids start investing?

Allow your child to pick a company of interest, so that he or she will be more of a “willing learner”, said Tania Brown, a certified financial planner.

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