Posted on July 18, 2021 at 7:50 pm

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6 Tips to Teach Older Children About the Workings of the Stock Market

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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.

  1. 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
  1. 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.

  1. 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.

  1. 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.

  1. 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
  1. 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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