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How To Simplify Key Investing Concepts When Discussing Finance With Your Children

How To Simplify Key Investing Concepts When Discussing Finance With Your Children

Learning to invest is a hard task for a lot of adults so you can probably imagine how difficult it would be for children…right?  

If we’re honest, our kids today are likely MUCH smarter than we were at their age but still teaching them about investing, how to invest and even teaching them some of the key concepts surrounding investing is a tough challenge simply because investing is a very complex subject. 

Thankfully for you (you’re welcome in advance by the way), we are here to help. Read on to find out our strategies for simplifying some of the most crucial investing concepts when discussing finance with your children.

stock chart

1. Saving Money 

A fun way to simplify this concept for your kids is by using a piggy bank. This idea is not innovative or new, but if your child isn’t yet ready to have a bank account, a piggy bank is a great kid-friendly tool you can use to teach your child about saving money as they eventually learn to invest. Every so often, provide your child with money (or allow them to earn money through chores, depending on their age) and guide them through keeping some of it for the present and putting away some of the money for the future as an easy way to teach them about saving money. 

2. Risk Management

The easiest way to simplify the idea of risk management for children is to take the “money” out of it and replace it with something they are currently fascinated with like watching TV or playing a certain video game like Fortnite. 

While, in real-life investing, risk management can be the difference between losing hundreds or thousands of dollars, make this concept kid-friendly by introducing the concept of risk through losing TV watchtime or video game playtime. 

risk

Give your child two tasks from which they can choose one to complete, such as helping wash dishes or making their bed. Since washing the dishes would likely take longer, give them the option to earn more time to watch TV if they complete the task within a set time but also establishing that not completing said task in the allotted time will mean they get less of whatever reward is a light-hearted and child-friendly way to introduce the concept of risks, rewards and managing the balance between those two key investing concepts under the larger umbrella of risk management.

3. Investment Diversification

Have you ever heard of the game show Million Dollar Money Drop? It’s a show that involves placing their money across different answers to a question and winning only the money they place on the correct answer to a given question. 

That show is a great example of how to simplify the idea of investment diversification for your kids. The core concept of this show exemplifies how you should always spread your investments out – or not put all your eggs in one basket – in case that one basket gets destroyed/that one investment fails. 

Using candy or another small item that you have plenty of around the house, give your child a math problem with three potential answers. Ask them to spread the total amount of whatever item you chose amongst those three answers based on how confident they feel in each individual answer, explaining to them that any amount of the item that is on an incorrect answer will be lost. This will, as the game goes on, help your child learn how to diversify their resources (which, in adult life, becomes money for investments) so that they can comfortably invest as they grow older.

We hope that we’ve given you some fun and entertaining ways that you can take with you to help your child begin to understand some of the foremost key concepts of investing from a young age. 

person fanning bills of american money

Learning to invest is hard work, but with strategies like these, you can put your child on a fast track to becoming our next great young investor!

Want more help teaching your child how to invest? 

Check out Explorer Hop’s learn to trade program, where our nationally and internationally-acclaimed programs work to provide you and your child with a comprehensive course on all things investing.

For more information, check out our website here and sign up for one of our many financial literacy courses today!  

We hope to see your child at one of our classes very soon!

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