Teach your Kids about Investing

Age may not always bring wisdom but it certainly helps develop a better perspective. I remember as a child one of the words I really disliked was “while.” When I asked when we were going to do something my mom would often respond, “In a little while.” I did not know how long a “while” was but I had learned that it was far longer than I was willing to wait. In raising my own children, when they want something and I am busy I quickly respond that I will be with them in a little while. Of course now that “while” seems to pass very quickly.

My grandparents lived near the beach, which was about a 45 minute drive from my childhood home. It was fun to visit them but the drive seemed to take forever. My brother and I would sack out in the back of the family station wagon and try and sleep off that long drive. Today it takes me a little over an hour to fly to the beach from Saint George, and as you can imagine, my own kids sit in the back of the plane and repeatedly ask, “Are we there yet?” As we approach the Orange County airport I can look down and see my old home in Yorba Linda, and my Grandparents neighborhood in Los Angeles in a single glance. I now have a much better perspective of my childhood world that I thought was so huge.

Few things are more valuable to an investor than perspective. As a young investor I loved to watch the ticker tape across the bottom of my TV screen. My emotions were up and down with each movement of the stocks I owned. Now, if someone asks me how the DOW Index is doing this week, I rarely know. Perspective has taught me the uselessness of following such things.

When a famous investor was asked in an interview what he thought of a particular company he responded, “It’s hard to tell, they’ve only been around for ten years.” Age and experience brings a valuable perspective to investing.

In trying to help my children gain perspective I make it a habit to review their investment account statements with them each month. I like to show Jayden (my 13 year old) how one particular real estate investment he owns pays monthly distributions. Initially he didn’t think the monthly credit amounted to very much, but over time he has learned firsthand about compounding growth, and has gained a real appreciation for what it means to let money work for him rather than the other way around. He is gaining valuable perspective.

Many parents open an investment account for their kids, but they miss a great opportunity by not doing regular reviews of it with them. Helping your kids save and invest money has value, but allowing them to learn firsthand from the experience will help them gain insight and perspective far more valuable than the account itself.