Learning Resources

Should You Teach Your Child to Invest?

25 Mar 2022

Should you teach your child to invest? | Pauline Teo | VI

Practice makes perfect. That's why Bruce Lee said, "I fear not the man who has practised 10,000 kicks once, but I fear the man who has practised one kick 10,000 times."

Managing your own money is the same. Over time, you would instinctively know what works and what doesn't.

But, as adults with jobs and bills to pay each month, we can't exactly afford to "practise." Mistakes cost real money. What's lost needs to be earned back.

If only we'd learned to invest as kids when we had zero financial commitments!

But should you teach your child to invest?

Yes, of course, you should. If you teach them the right stuff, it can really benefit them in both the short and long term.

However, some parents already believe that investing is complicated, even they have trouble investing themselves. Some even swear that investing is a scam. What more if they're expected to teach their children about this topic?

Actually, investing can be fun, creative, and easy.

In fact, it's pretty much the same as playing with toys. You just need to learn how to make it into a game and set a few simple rules that will make it easy for you and your children.

I know a lot of parents would say ‘let the kids just be kids.’ I've heard a lot of debates, arguing if you should teach your child to invest. Why need to burden them with this when they're busy enough with subjects in school? 

Here are 5 reasons why I think our children should be investment-ready:

1. It's a life skill

Why do we bring our children to classes like ballet, swimming or coding? It's simply because we want them to master an important skill.

If we can teach our children to dance, swim and code, why can't we teach them to invest, too?

By learning the basics of investing, your children will be able to practise and gain confidence when it comes to managing money throughout their lives.

They pretty much can survive anywhere in the future because they're equipped with this money-making skill. So, if you're thinking, should you teach your child to invest? I'd say ABSOLUTELY.

2. They're a blank canvas

One of the challenges when learning something new as an adult is that we'd always have to UNLEARN something for us to RELEARN it.

But it is a completely different case for children. As with paintings, it is much easier to paint on a blank canvas than doing so on a canvas that's already been painted on before.

Children are naturally curious, and they are always wanting to learn. They enjoy playing with toys and games and want to be creative and innovative.

Investing is no different. When you teach your child about investing, you can give them something to think about and something to play with.

It can be as simple as teaching them how businesses make money by playing pretend restaurant games with their cooking set.

3. It instils the right mindset and emotional stability

In case no one told you yet, investing is more than just numbers.

The share prices and financial performances of a company affect your portfolio much lesser than your own mindset and emotions.

Going into investing with a "get in and get out quick" mindset or selling at the slightest price drop, will not only make you lose more money, but it'll also lead you to make many more subsequent bad investment decisions.

Teaching your child to go into investing with the right mindset helps your child to be much better at decision-making because they'll be able to analyse information, make the best decision, and communicate their thoughts effectively.

It's also an opportunity for you to teach your child the basics of taking responsibility when things go south.

4. They won't only depend on their job for income

As adults, we work hard at our day job and do everything we can to increase our salaries. But that's not enough. What if something bad happens tomorrow and we're no longer able to work to bring in an income?

That's why the best thing you can do for yourself is to diversify your income. We should never rely on just one.

Think of ways to make passive income, such as investing in stocks. A business and a job give you active income. This income from investing is called passive because it doesn't require much work.

And you should teach your child the same.

Teach them investing and the importance of passive income, in case their active income source suddenly disappears. For example, if their job is taken away. If they are lucky, they will be able to find another job. But if the new job is just as bad, then what?

5. They will start building their wealth early

Should you teach your child to invest? | Pauline Teo | VI

This goes without being said but the sooner you teach your children investing, the sooner they will start building their own pot of gold.

Warren Buffett started investing at 11 years old. At 91 today, he's had around 80 years to compound his wealth using the correct methods and mindset. That's why he's one of the richest men in the world.

Being a parent, one of the biggest worries you can have is if your grown-up child would survive out there being on their own and if they'd have enough to eat day to day.

But if you teach your child to invest, you can sleep at night knowing they have the skills and the money they need. 

Real investing does not have to be painful or tedious, be it for adults or children. It is logical, can be understood with common sense, and in the children's case, fun.

Teaching your child investing is not forcing-them-to-sit-in-a-chair-reading-a-financial-report-for-2-hours kind of boring. Instead, you should teach your child how to invest in fun ways, such as through games, toys and walks in the shopping district to better understand business fundamentals.

But bear in mind that only when we as parents have the right mindset around investing, can we share it with the younger generation.

Start building the right mindset on investing that you can also pass on to your children. Join me for a FREE two-hour masterclass.

~ Pauline Teo

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