Adventures in Investing: Making Financial Education Fun and Accessible for Kids

Investing is a daunting term for adults. In fact, according to recent Gallup polls, only about 61% of American households do any kind of investing (just a little over half of us).

The good news is that those numbers continue to rise as more of us realize the benefits of putting money away to build and grow for later. The even better news is that you can dramatically improve your child's likelihood of following suit if you model how to do it for them now. 

Just as we teach our kids how to read and write, it's important that we also impart the principles of financial literacy from a young age. This kind of education will not only empower them with lifelong skills but will also help lay the foundation for a more secure financial future.

But as complex as the financial world is, it can be tough for parents to find innovative, creative, and engaging ways to teach the basics of money management and investment to their kids.

That's why, in this post, we'll take a closer look at the world of investing - but with a twist. We'll show you how you can make investing engaging, accessible, and most importantly, fun for your kids. 

The Importance of Starting Early

"The earlier, the better," and with investing, this rings particularly true. Compound interest is like a magical force of nature, bestowing those who start young with bountiful returns. A small sum set aside for investment when your child is young can burgeon into something substantial by the time they hit adulthood.

Let's look at a couple of case studies to drive this home. Sam starts investing $2,000 a year at age 19 and stops at 26. Robert doesn’t start until 27, putting away $2,000 a year until he retires at age 65. Both example investments grow at an 8% annual rate of return.

By the time both retire at 65, Sam, who invested $16,000 in total, will have amassed a whopping $1.9 million, while Robert, who invested a full $78,000, will end up with only $1.5 million. Sam’s early start gave him nearly half a million dollars more than Robert, despite having invested less over the long run.

Knowing this, the question arises - how can we instill these principles early on and make sure our children are financially savvy? The answer is a blend of education, practice, and real-world application.

Building a Strong Financial Education Framework

To make financial education “stick,” we need to build a solid framework, much like constructing a house. The framework should envelop core concepts, from earning money to saving, spending, and finally, investing.

Here are some core components of this framework.

Earning an Income

Children often understand that people work to earn money, but the concept of different types of income can be introduced here. You might explain the difference between a salary, wages, and bonuses. 

This is also a good time to start discussing the value of their time and skill, setting the stage for future employment. You can start having these conversations fairly early on with your child, as young as preschool or elementary school.

Saving and Budgeting

Saving money and creating a budget are essential next steps, and these can also be started young - as early as toddlerhood. Provide a piggy bank or jar for them to see how their savings accumulate. 

For older children, introduce a simple budget, dividing their money into categories like toys, movies, and maybe even ‘future investments.’

Spending Wisely

Spending decisions are where money education can become really hands-on. Encourage your children to ask themselves if they really need a specific item or if it's something they just want. 

Lessons like patience, delayed gratification, and making intentional purchases can all be incorporated into this step.

The Magic of Interest

Introduce the concept of interest, both for saving and when borrowing money. Show them how their money can grow without any additional work on their part. The idea of putting money in a bank and earning more over time is a great starting point.

Investments and the Stock Market

Investing in stocks may sound advanced for kids, but at its core, it's about ownership. Use everyday examples to explain that owning a piece of a company means you are invested in its success. Visual aids like planting seeds and watching them grow can help when it comes to explaining this concept.

As your child gets older, there are plenty of other ways to make investing education fun. For example, the following games offer a great way to teach kids how to invest their money (and some are suitable for kids as young as ten or eleven years old):

• Stock Market Game
• STAX
• Virtual Stock Exchange

By layering these lessons, children develop a comprehensive understanding of money – how to earn it, save it, and, most importantly, how to make it work for them.

9 Fun and Interactive Ways to Teach Kids about Investing

Now that we have a framework, it's time to add color and vibrancy to these financial lessons. This is where fun and interactive methods come into play. The more engaging the activity, the more likely it is to stick with your child.

We already told you about some fun online investing games you can play with your child, but you don't need to digitize things to make it enjoyable. Here are a few more ideas:

1. Investing in Mini Markets

Turn the traditional lemonade stand into a mini market. Instead of just selling lemonade, encourage your child to invest in other offerings - cookies, handmade crafts, or collectibles. 

Discuss which items are more likely to sell, which yield higher profits, and how to manage their ‘business’ to invest in other opportunities.

2. Money Jar Game

Create a game involving different jars representing saving, spending, donating, and investing. 

Each time your child receives money, they allocate a percentage to each jar, instilling the habit of diversifying their funds and considering charitable giving as part of the financial picture.

3. Simulated Stock Market

Use simulations or board games that mimic stock market trading. 

Apps like Wall Street Survivor offer fictional money to start with, allowing kids to experience the highs and lows of the market without any real financial risk. Together, you can track how their ‘investments’ perform.

4. Take a Share

Purchase a single share in a company that they're interested in, like Disney or Netflix. Encourage them to follow the company's news and financial reports, so they begin to understand how their investments are tied to the performance and decisions of the business.

5. Choose EarlyBird

EarlyBird provides families with a tax-advantaged and flexible custodial investment account, allowing the family to contribute to the account. Those funds can then be invested in stocks, exchange-traded funds (ETFs), and mutual funds, harnessing the power of compound interest on behalf of the child.

The best part? EarlyBird can be included as part of your child's investing education, showing them in real-time how investing works and why it's such an awesome tool. It offers parents and their children the ability to track performance and review long-term trends. 

Perhaps most importantly, it encourages family conversations about financial goals and planning.

6. Consider Entrepreneurial Ventures

Support your child's ideas for small businesses or ventures. Whether it's a dog-walking service or making and selling greeting cards, these activities blend the lessons of earning and investment.

7. The Power of Books and Stories

Books can breathe life into the world of investing. Stories like "The Richest Man in Babylon" (parables that offer advice on personal finance through tales set in ancient Babylon) or "The Little Book That Beats the Market" can make the concepts more approachable and entertaining.

8. Incorporate Ongoing Conversations and Real-World Examples

Money and investing discussions should not be confined to specific ‘lessons.’ They should be ongoing, supplemented by real-time examples that are relevant to your child's world. 

Talk about the products they see in the store – are these from companies they’ve invested in? 

Also, discuss things that consume a daily routine, from the games they play to the shows they watch. Make connections between these activities and the broader financial world.

9. Offer a Supportive and Safe Learning Environment

Openness and encouragement are at the very core of your child's financial learning. Mistakes should not be frowned upon but instead, used as learning opportunities. Set up a safe environment that allows them to experiment, ask questions, and learn from both their successes and failures.

The Takeaway

At the end of the day, the topic of investing doesn't have to be daunting or dull. By infusing it with a bit of creativity and making it as interactive as possible, we can make sure our kids are not only prepared for tomorrow's financial landscape but are well on their way to becoming shrewd investors of their own making. 

The adventure in investing is one that prepares our children for the bigger world, and it’s a journey worth taking, every step of the way. Let EarlyBird be your partner on that journey - and enjoy the road ahead.