Some parents today recognize that their children should learn how to save and invest. More than ever before, they are concerned about their children's financial future, and they realize that reading, 'riting and 'rithmetic are no longer sufficient to guarantee a decent standard of living. Indeed, financial experts agree that young people need financial skills to survive the economic challenges of their adulthood.
Unfortunately, not all parents appreciate the need to help their children become Teenvestors or can easily find age-appropriate help for their children. If you do have a slight interest in boosting your children's financial acumen, you probably won't get much help from the educational institutions your children attend. It appears that many school systems make a point of avoiding the topic of teaching the young how to handle money. It is odd that in the US, a country with one of the largest gross national products in the world, produces graduates who know very little about money, and how to make it grow.
Reasons Parents Don't Encourage Young Teenvestors
Investing is a good habit that can be learned at an early age. Regular investors end up saving far more than occasional investors even when they regularly invest a small amount at a time. The most
important thing about investing, however, is that time is your friend-the earlier a person starts, the better off that person will be in the long run. And time is a good friend of Teenvestors, most of whom will retire in about 51 years.
Unfortunately, however, the typical investor is a 45-year-old man. What about all those with the power of youth behind them? Why shouldn't young people learn that they too can make their money grow? As with most things in life, parents have a big influence on their children's savings and investment habits. Parents are the ones that have to step up and introduce their children to the life-long journey of money management.
In our research, we have found that there are five major reasons parents shy away from encouraging their children to start investing at an early age:
Parents themselves don't know much about investing;
Parents feel their children can't understand investing concepts;
Parents fear their children might put too much emphasis on money;
Parents feel that teaching their children about investing will interfere with their basic education (like the three R's); and
Parents feel investing skills will come naturally with maturity.
Parents Themselves Don't Know Much About Investing
Some parents just don't know much about investing. To many of them, investing money can be quite confusing and intimidating. For one thing, it looks so mysterious. All that jargon such as earnings per share, leverage, price-earning ratios, dividend yields, and others is enough to intimidate any individual looking for a basic understanding of investments. Then there is the myth that investing requires great mathematical acumen. With all these perceived barriers to becoming an investor, many people choose to stay out of the markets completely or let the "experts" handle their money, at a great expense, we might add. But what you don't know is that many brokers don't have more than high school diplomas. What they do have, however, is the benefit of experience; experience they gain by essentially advising you on what stocks, bonds, and mutual funds you should buy.
One of the problems with turning everything over to the so-called financial experts is that you don't learn anything about investing. What this means is that you will always be dependent on brokers who are probably no smarter than you are. It also means that you have no knowledge about investing that you can pass onto your children (except perhaps, to advise them to get a broker).
But an old African proverb says: "A man's morning begins whenever he wakes up during the day." Translation: it is never to late to wake up and start changing your attitudes and behavior.
Parents Feel Their Children Can't Understand
Most of you have probably heard of Junior Achievement, which for the past 70 years has been teaching children about capitalism-including the stock market. However, you may not know of other organizations such as The Security Industry Associate (which runs The Stock Market Game, a contest for aspiring young investors), Young Americans Education Foundation, Teen Business Camp, The National Council on Economic Education, and many more that have been successful at teaching young people investment basics. These organizations have been quietly getting young people prepared for a money-savvy life.
We have personally experienced the ease with which young people can pick up clearly presented investment concepts. For years, we ran a camp called Teen Business Camp in which 14 to 17 year olds spent two weeks on a college campus to learn about the stock market and entrepreneurship. One year we established a stock portfolio with Merrill Lynch & Co. and tracked the results daily, noting any economic news that affected the portfolio. The Teenvestors graduated from the program with a working knowledge of the stock market-much more knowledge than an average 21-year-old college graduate's.
Parents Fear Their Children Might Put Too Much
Emphasis On Money
Some parents avoid teaching investing at an early age because they fear that their Teenvestors will put too much value on making money. To ensure that Teenvestors establish healthy money habits without being obsessed with money, parents should continue the moral lessons they teach daily. Teaching your Teenvestors investment concepts is only one of the ways to insure that they are prepared for a more financially stressful life when they reach adulthood. The reality is that your children will have to learn about money one way or another, with or without your help. You can make sure they put money and investing in perspective-neither making it the most important thing in their lives nor ignoring the benefits of saving and investing. Without your help, they will grow up unprepared for financial difficulties they may face at some point in their lives.
Parents Feel That Teaching Their Children About
Investing Will Interfere With Their Basic Education
Some parents think that teaching their children investment basics will interfere with the three R's-reading, 'riting and 'rithmetic. We believe that investment skills are as important as the basic academic skills students learn in school. We hold this view because of the vast changes in the American economy in the past few decades. For one, stability in the workforce has disappeared. There are no more job guarantees and this means that, as adults, your children may face financial droughts unless they know how to save and invest their hard-earned money. In addition, consider these possibilities: young people face the prospects of receiving less financial aid for their education, diminished social safety nets (such as reduced Social Security benefits and welfare), managing more of their retirement funds on their own than you do now, and of shouldering more of their own medical expenses. These realities make it imperative that your children learn more than how to read, write, and do calculus. They also have to know about growing whatever amount of money they have.
Parents Think Investing Skills Will Come Naturally
Hoping that the young will pick up investment skills as they get older is wishful thinking. We firmly believe that money management skills are similar to other skills such as learning how to play tennis or the piano. Children don't just magically know how to play tennis by watching Wimbledon. They have to hammer away at the ball on the court under the watchful eye of someone who can teach them how to swing. Golf superstar Tiger Woods started swinging golf clubs at the age of four. There is no question that the earlier one begins to learn a skill, the better. In addition, if you let your children learn how to manage money by trial and error, they may never learn that saving and investing should be a lifelong habit.