- I’m a financial writer, but I’m still not teaching my kids how to invest.
- They’re not making an income, so I don’t think their teaching about investing is practical right now.
- I am more focused on teaching them financial values that will serve them long term.
There is a lot of chatter about when parents should start teaching their children about saving, investing and building wealth for the future. I’m a long-time finance writer and I love saving and investing, but I’m not teaching my kids to invest.
Here are a few reasons why I’m not trying to get my kids to start their own brokerage accounts.
My children are only 16 and 14 – they have no income yet
Aside from their small allowances and occasional birthday and holiday gifts from relatives, my children earn no income. They don’t have part-time jobs. When people have no income, it’s hard to get too excited about investing.
And even if my kids had part-time jobs now, they likely wouldn’t get a 401(k) plan or company match. Instead of investing in stocks, I would encourage my kids to save extra money from their part-time jobs in a high-yield savings account instead of worrying about locking up their money in investments long term like stocks. Young people just starting out in life may not want to bother with the volatility and risks of the stock market; just build your emergency savings fund first.
People tend to learn financial knowledge on an ‘as needed’ basis
In a 2022 National Fund for Financial Education survey of American adults, 80% of respondents said they wished they had been required to take a financial education class in high school. But do you remember what it was like to be a high school student?
I suspect that most of the practical “adult life” advice about personal finance will feel relevant to teenagers, and a 2013 analysis of research backs this up, finding that 20 months or more after the time of the intervention , financial education had “negligible effects on behavior.” If you try to teach high school students about 401(k) plans and diversified equity assets, it goes in one ear and out the other. Children are unlikely to understand things like credit card debt when they are too young to have a credit card; Neither did I when I was that age.
The idea of buying exchange-traded funds (ETFs) or opening a Roth IRA account probably feels strange and out of touch with my teenage children’s reality. I believe my children will be ready to learn more about investing when the time is right – when they are actually ready to start saving for retirement at their first job. My kids already know some of the basics of saving and investing, but they don’t worry about stock picking. And speaking of stock picking…
I don’t want my kids to be day traders
I often worry that today’s younger generation is too comfortable taking big risks with investments. I don’t want my kids to learn investing by losing money on a trading app. Many day traders lose money. And even many professional stock pickers don’t beat the market for long.
The best way for most people to invest for the future is not picking stocks, trading options, or buying memecoins. It is to earn stable and comfortable income. Save and invest 10% (or more) of that income in a diversified portfolio of mostly stocks and some bonds. Then, let the magic of compound interest grow your money for many years.
I’m teaching them financial ‘values’ instead of giving them stock advice
Instead of teaching my kids how to invest as teenagers, I’m trying to teach them basic values about finance. I want my children to live within their means, avoid excessive risks with their money, and build sustainable, long-term careers. I want my children to invest in their education, in their careers and productive skills, in their personal health and well-being, and in healthy, happy relationships with the people they love.
Someday, when my kids are grown, have “real jobs” and their first paychecks, and are ready to start picking investment funds for their 401(k), I’ll be happy to i help you But until then, my kids don’t need to worry too much about learning to invest.
