When Should You Start Talking to Your Kids About Investing?

CentsAbility What We Do Header

I want my kids to be investors.

In a 2015 BlackRock Inc survey, 51% of Canadians believe investing is like gambling, and only 44% believe investing is for “people like them”. Much of this sentiment comes from fear and misunderstanding of the markets. Bad news is, savings accounts and other safe products pay anywhere from basically nothing to a whopping 1.8%. To echo Rob Carrick, you can’t save your way to retirement if you’re not even keeping up with inflation.

What’s a great way to make Canadians comfortable with investing? Start talking about it really early.

Whenever you begin talking to your kids about money is the same time you should talk about investing. They are not separate concepts. The easiest way to start the money conversation is around age five and with an allowance. Many experts recommend splitting that allowance into the categories of Save, Spend and Give. There should also be a fourth right off the bat, which is Invest.

Whenever you begin talking to your kids about money is the same time you should talk about investing.

If you assume explaining investing to a child is too difficult, think again. First of all, your kids are learning sponges – look at how much they are absorbing every day at school! Secondly, investing is a simple idea at its core: Saving for something that is a really, really long time away. The difference from regular ‘Saving’ is simply a matter of time. Saving is for short-and medium term goals (like a video game or first car) and Investing is for long-term ones. We started by telling the kids that investing is so that they will have money to live on when they’re a grandma or grandpa. You can fill in more blanks as the kids get older.

Initially our kids’ investing money was held in a separate bank account. Now that our oldest is 12, we have introduced her to the concept of mutual funds and have opened an account in my name on her behalf. It’s a simple, low-cost balanced fund through Tangerine. She understands that she owns a small part of a whole bunch of companies, and we check every couple of months on the performance. Through these regular investing meetings, she’s learning about diversification, dividends, risk tolerance and being comfortable with the ups and downs of investing. These aren’t long complex meetings. We may chat for 5 or 10 minutes, then not again for two months.

In the end, I hope that my children never have to talk themselves into being investors. They’ll already be one.

Rich Regards,

Morgan

Morgan Ulmer Photo Interested in personal finance?  Subscribe to our newsletter here.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *