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Three conversations every parent should have with their children to help them understand investing

Three conversations every parent should have with their children to help them understand investing

| January 29, 2018

When it comes to discussing investments with your children, not many parents know where to begin. How much information should be divulged? What lessons should be learned? How can I explain how investing works in an easy to understand manner?

If you’re a parent who wants to talk to your children about investing but don’t know how, you’re not alone.

A study from T. Rowe Price found that while 80 percent of parents believe it’s important to talk to their children about finances, 41 percent of parents have never discussed investing with their children at all. 

There’s no denying the importance of discussing money with your children, and investing is an important topic to cover with them to prepare them for future financial success. So, why don’t many parents discuss investing with their children?

Many parents are reluctant to discuss investing with their children, as they are apprehensive to share specific financial numbers with them. However, I always reassure parents that there’s no need to divulge specific numbers with children, as it adds no real value to the lesson learned.

Ultimately, I encourage parents to normalize the behavior of investing. There are several ways you can make Wall Street more accessible to them in their daily lives. From pointing out products used in the home that are made by publicly traded companies to even having honest dialogue with them about previous investments that didn’t work out very well.

By having regular conversations with your children about investing, you are normalizing this behavior. This way, when your child grows into a fiscally responsible adult, they will assume investing is as normal of a behavior as, say, learning to drive a car as a teenager.

The below are some of the best types of conversations parents can have to teach their children about investing and normalize this behavior.

Be honest about past financial mistakes

As previously mentioned, honesty is the best policy when it comes to discussing finances with children, and conversations about investments are no different. I encourage parents to be vulnerable with their children about the mistakes they’ve made financially, as this will cultivate an environment where children will come back to their parents for financial advice as they grow older.

This conversation is also important to have because it lets your children know it is okay to ask questions and to ask for help. Honesty about past financial mistakes also frequently leads to very impactful discussions amongst families.

Bring Wall Street into your home

There are several ways you can make the concept of investing more approachable with your children, and it all starts in your home, literally. Bring your children’s attention to products used at home, their favorite TV shows and movies, electronic devices, clothing and other items that are created by publicly traded companies. For example, when your child is brushing their teeth, point out the brand of toothpaste they are using and explain that it is manufactured by Procter & Gamble, a publicly traded company. While you’re running errands, or eating at a restaurant, you can also point out the publicly traded companies you are patronizing, such as Wal-Mart, Target, Panera Bread and Olive Garden.

It is important to teach children that Wall Street is part of our ordinary lives, and that it is so much more than an intangible entity. Rather, investing is about putting money into companies that make products we used in everyday life.

Encourage teenagers to begin investing

Parents also always ask me, “When should my child start investing?” I believe that once a person begins earning income, they should start investing. For many, this comes as early as high school when a person begins their first part-time job.

Real life experience with investments is not only a great way to learn, but is also an effective way to jumpstart financial independence.

For more information on how to have impactful financial conversation with children, please click here to learn more about my complimentary workshop, Raising Financially Fit Families, which I present to groups and organizations of all sizes.

Registered Representative/Securities and Investment Advisory Services offered through Signator Investors, Inc. Member FINRA, SIPC, and Registered Investment Advisor. 8515 Cedar Place Drive CEDAR PLACE DRIVE Suite 108 Indianapolis, IN 46240 134-20180112- 425985