The Stock Market for Kids…Seriously?
Surely you wouldn’t dream of teaching your kids about the Stock Market? That dark, ruthless place isn’t somewhere you want to introduce to your kids or students…. Is it?
Well yes, yes it is.
Because, it is an absolute necessity, maybe even a right, that this world is introduced to everyone, not just kids and students. By educating our kids on how to grow their money and receive their fair share of the market, we are giving them the chance of a lifetime of financial free stress. Something everyone is entitled to.
If this sounds like somethings that interests you, you might enjoy this article! Or alternatively, see my Stock Market resources here.
How to explain the Stock Market to a child.
How to explain the Stock Market to a child? Well, with my own students I used the simple idea of a money machine.
(Check out how I attempted to introduce the topic to my own kids here!)
The money machine is filled with thousands of companies, banks and governments that help grow the money that is put into the machine. Very often, the machine runs smoothly, but like all things, sometimes a hic up or a slowdown in is capabilities is to be expected. As long as your students know and understand that these times will come and are prepared for them, there is no reason why they shouldn’t be invested in the Stock Market.
What’s not to love? Your money growing daily with little to no effort from you? A passive income for life!
Within my own class, I go into much more detail about the Stock Market, but for convenience, here are 5 top tips for teaching the Stock Market to kids.
Tip 1: Be Honest.
The facts speak for themselves, the Stock Market has endured an upward trend of growth since records began. Period. If you are invested and well diversified over a medium to long term, you will almost certainly grow your money. Unless there is a world apocalypse.
Teach the downsides too. The rare, but important times the Stock Market was down for two or more consecutive years. Make note of the great depression and the dot.com bubble. Study the housing market crash and recession that lead to the banking crisis. Be open about these events, they are important. There are lots of lessons to learn from them. Including the massive Bull markets that followed them all and of the investors that sold out in fear and missed out on the markets upside.
Teach the history, look at simple graphs, see that human imagination, creativity, business knowhow and innovation will prevail. (Or alternatively, governments can just print more money…)
Bonus tip: Encourage your students or kids to begin an emergency fund to use during down times, buy more stocks when the crashes come and get everything on sale! There are bargains to be had! A crash can be like a Black Friday x10 for some forward thinking investors!
Tip 2: Teach Diversification.
The Stock Market terms and definitions can be tricky for kids. Diversification is one of those words that may seem more awkward, but it is really quite straight forward. Put simply, buy a bit of everything, from everywhere! Explaining that by buying small pieces of companies from all sectors and markets, you are giving yourself the best chance to grow your money, but also protecting your investment as there is no doubt that one or more areas will be hit with a correction or even a crash at some stage in their investment journey. But its ok, as their money is so well diversified that they can hedge against these blips, particularly if they have the luxury of time.
Use this resource to help with other Stock Market terms and definitions here.
Tip 3: Help protect their money by encouraging them to buy mostly passive, Index Funds.
Teaching your students to buy everything! As Jack Bogle once said “Don’t look for the needle in the haystack. Just buy the haystack!”. There is no need to spend your time day trading, watching the buying a selling of stocks every second. Teach your kids to simply automate their money to a cheap, passive Index Fund will ensure they are getting the average of any growth. And the average is not something to turn your nose up at! 7-8% potentially is much better than any nonsense banks are offering right now! Now, if 90% of their money is using a Dollar Cost Averaging method, automatically buying Index Funds each month, they may wish to play about with the last 10%, buying what they are interested in or to diversify even further into real estate, commodities or even avocados!
Tip 4: Study the Success Stories.
Warren Buffet, Ray Dalio, and Benjamin Graham all knew that the Stock Market was where you grow your money. Your students could study these successful investors and maybe be inspired to grow their own money in the Stock Market in the future.
Jack Bogle was also a clever character who brought Index Fund to the masses, believing that investing in the Stock Market should involve small fees and be accessible to all. Biographies on these investing and Stock Market legends are a super way of humanizing the Stock market and displaying how successful you could be if you play the long game and are careful with your investments.
Tip 5: Stock Market for Kids Game.
Using a Stock Market for kids game should really appeal to kids and students. There are lots of great Stock Market games out there to help simulate a Stock Market experience.
Check out these Stock Market for kids game here.
Apart from using simulators, it is also a great idea to introduce the Stock Market with introductory Stock Market worksheets for students, or potentially using a Stock Market vocabulary worksheet to help embed a few of the terms needed.
Resources similar to these can be found here.
The Stock Market for kids should be an integral part of educating young people about their finances. Learning the Stock Market terms and definitions, how it all works and most importantly, its potential to grow your money exponentially can be a gift to any young person who is ready to start out on their own financial journey.
And you can never be too young. I’ve taught my on children, age 7 and 9, the basics of investing. The importance of buying assets and not liabilities. I‘ve taught my class of 10 and 11 year olds all that they need to know in beginning to invest their money into the stock market. I have tax efficient investment accounts and Junior Pensions for my children, which they help maintain. Starting investing early can be one of the greatest gifts you can give your child or your class. Time in the market as opposed to timing the market will always be more successful.