Investing is a vital skill that can empower your children to secure their financial future and achieve their dreams. Instilling a solid understanding of investing at a young age can be a valuable gift. So, when is the ideal age to start, where should you begin, and what advice should you give your children as they embark on their journey as young investors?

The Ideal Age to Start Investing

The ideal age to introduce your children to investing can vary, but generally, it’s beneficial to start teaching them about money and financial concepts from a young age. You can begin with basic money management lessons as early as primary school, teaching them the value of saving, budgeting and setting financial goals. As they grow older, say in their early teens, you can introduce them to investing.

Where to Start

Education

Start by providing a solid foundation in financial literacy. Explain concepts like stocks, bonds, mutual funds and the risks and rewards associated with each.

Practice

Encourage your children to practice investing using virtual stock market games or simulated portfolios. This hands-on experience can help them understand the market without risking real money.

Savings Account

Open a savings account for them and teach them about earning interest; this will help them see the power of compound interest.

Stock Market Basics

Introduce them to the stock market and its key players like NZX and other prominent companies. Discuss the KiwiSaver and the concept of retirement savings.

Diversification

Teach them the importance of diversifying their investments to spread risk.

Advice for Young Investors

Long-Term Perspective

Emphasise the importance of a long-term investment horizon and encourage them to invest with a goal of growing wealth over time rather than trying to make quick gains.

Risk Management

Explain that all investments carry some level of risk. Ensure they understand the concept of risk tolerance and the importance of not investing money they can’t afford to lose.

Research and Knowledge

Teach your children to research and stay informed, and show them how to read financial news and company reports.

Patience

Remind them that investing is not a get-rich-quick scheme and that patience is the key to success in the stock market.

Embrace Learning

Help them learn from their mistakes and successes. Investing is a continuous learning process.

Set Goals

Help them establish clear financial goals, whether saving for college, a car, or retirement.

Ethical Investing

Discuss the concept of ethical or sustainable investing and its relevance in today’s world.

In New Zealand, fostering financial literacy and introducing children to investing can set them on a path to financial independence and security. By starting early, providing education and offering guidance, you can empower your children to make informed financial decisions and confidently navigate the complexities of the New Zealand investment market.