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Home › Articles › Your Children › A Good Investment

A Good Investment

Teaching Kids How to Invest in the Stock Market

By Doris Keeler

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Bethany Murphy uses a similar approach to savings. However, her system involves three envelopes: savings, spending and charity. For Robert Grace, his savings are in black and white. "We have an allowance book that we keep for the kids," says Robert's dad. "Instead of giving them the money, they keep track of their money and what they plan to do with it."

Robert has been using the allowance book since he was old enough to write, about the age of 4. His parents believe the system is teaching him practical skills he's not learning in school. For Robert, his savings plan also offers him some stability in the up and down world of the stock market. "I have a savings just in case the stocks were to crash," admits Robert. "They probably won't, but I have it as a backup."

When to Start
Godfrey says parents should start the educational process when their children are 3 that's when they can be given an allowance. At 5, she advises opening a bank account and by 10, involving children in stocks. Once children turn 12, they should start earning money outside the home and get involved in defined portfolios. And, Godfrey says, by the age of 16, children should be off the allowance system and earning all their extra spending money.

As for investments, Godfrey says parents need to stay up on the market and make the discussions a regular part of the day. She says the stocks don't necessarily have to be kid-friendly. Children will understand any stock described to them in their language. "We want the kids to really be part of what's going on and understand the market," she says. "Kids today are very savvy and will understand what you tell them."

Tom Murphy says what helped Bethany understand the market was the newspaper's stock market game. It's an activity he says parents can guide their children through at home by choosing stocks and tracking them over a period of several months.

"It's never too late," Godfrey says. "Just start with the basics and keep repeating them. It's a forever system."

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