For this weeks’ blog, I’m going to jump straight into a story (which I think is quite funny) to help kids learn about investing. I believe that if kids can learn about investing at a young age, they are more likely to start saving and that can be life changing. This topic is especially important if inflation remains high. Inflation erodes any money your kids have saved in a bank or savings account.
The Misunderstandings! (A story about investing)
Chad’s new plan to get RICH!
“Guys, guys, guys … I’m going to be RICH!” said 13-year-old Chad.
“What are you talking about?” questioned his friends
“I just went to the charity (thrift) shop and picked up 10 pairs of really nice socks!” replied Chad
“Why have you been buying socks and how are they going to make you rich?!”
“I overheard my mum on the phone to one of her friends. She believes that socks are going to make her money over the long-term. She’s heard of many people who are making money from socks. So I thought I’d get in on the action and start buying some socks too!” Chad told his friends.
All the friends looked at each other very confused about how socks were going to make him money.
It was then that his friend Suki stepped forward. “I think you might have misheard your mum on the phone. I don’t believe she’s been buying ‘sock’. I think she was probably saying ‘stocks’.”
“What are ‘stocks’?!” said a now confused Chad
A stock is when you own a piece of a company. For example, if you own McDonald’s stock, you own a piece of McDonalds. So when McDonalds makes money, you earn money.
“Oh no! What have I done? I’ve now got all these socks …. This stinks!” replied Chad “At least I learned something new I suppose!”
Chad’s new invention
A few weeks later Chad caught up with his friends again. This time he was wearing the most ridiculous belt you’ve ever seen. It had 12 small cups hanging off it.
“What on earth are those cups on your belt?” his friends asked.
“This belt is my new invention which is going to make me rich!” replied Chad.
He went on “You see, I heard my mum on the phone with one of her friends. She was worried that some people put all their eggs in one basket and that is risky. So I’ve invented this belt where each egg is individually protected in a special egg cup. Now people can keep their eggs safe …. No more worrying about their eggs!”
Chad's friends all smiled and again Suki stepped forward. “I don’t believe your mum was talking about actual eggs. She was probably talking about using her money to buy stocks again. You see, when people buy stocks, some people put all their money in one stock (one company) and that’s like putting all your eggs in one basket. If that company goes out of business then you lose a lot of money. Just like losing all your eggs if they are all in one basket and you drop your basket. Therefore, people say that you shouldn’t put all your eggs in one basket to mean that you should put your money in lots of different stocks (companies), not just one or two, as then it lowers the risk of losing your money!”
“Oh no, this invention isn’t all that it’s cracked up to be!” said Chad “At least I learned something new I suppose!”
Chad’s new pet
Again, a few weeks passed and Chad was meeting his friends as usual at the park.
“I’m so excited” said Chad “I think I’m going to get a new pet bear!”
“You can’t be serious! Where are you going to get a bear from?” questioned his friends.
“Apparently there is a bear market and my mum thinks we are going there soon.”
“A bear market? There’s no such thing as a bear market!” said his friends.
Again, Suki stepped forward “I’m sorry to be the bearer of bad news but a bear market isn’t where you buy bears! I think you overheard your mum talking about stocks again. A ‘bear market’ is when the price of companies (stocks) falls a lot (20% or more since the previous highest value). There is also a ‘bull market’ which is the polar opposite and is when the price of stocks goes up a lot.”
“Oh no - I seem to only know the bare minimum when it comes to investing!” exclaimed Chad “At least I learned something new I suppose!”
Suki to the rescue
“Suki, how do you know all this stuff?” all her friends asked
“Who do you think Chad’s mum was talking to on the phone? It was my mum. They are good friends and they love talking about buying stocks to help their money grow. She even bought me a book called, Grandpa’s Fortune Fables, so I can learn all about how to look after my money and make it grow by putting my money in the stock market. I’m sure your mum would be happy to teach you all about it if you ask her.”
Chad spoke to his mum and she was delighted that he wanted to learn about investing. She wasn’t sure how to set up an investment account for her kids but luckily Suki’s mum said there was a helpful guide on the website www.bluetreesavings.com/investing-faq which had lots of useful information.
Soon enough, Chad’s mum had set up an investment account for him. His money is now doubling every 8 years (on average) and he has gone from being the ‘silly kid’ to one of the wealthiest people from his school all because his parents taught him about investing.
Key message from the story
I hope this story inspires you to start teaching your kids about investing and that you consider setting up an investment account for them. It doesn’t take long to set up and can change their financial future for the better. Please check out my 'How to teach kids about the stock market' blog and our investing FAQ to help you learn more about investing and setting up an investment account for your kids. Of course, feel free to contact me directly if you have questions (firstname.lastname@example.org) If you enjoyed the story then please share and subscribe below as I write about a new topic each week to help you teach your kids about money. Next week I’ll be releasing my first interactive blog for your kids to learn a new money topic. Make sure you subscribe below so you don’t miss that. Thanks for reading! Will
P.S. The book, Grandpa’s Fortune Fables, has now helped thousands of families and kids learn about money using stories. You can learn more about the book here. Why not gift a copy for the next kids' birthday party?