You don’t have to be extraordinarily intelligent or lucky to become wealthy. You don’t have to know what the market is going to do next month or next year, and you don’t have to be the greatest stock picker. Investors need three things to dramatically increase their chance of becoming wealthy: time, patience, and discipline. All three can be taught at an early age, resulting in kids who are smart about money.
Kids, Money and Time
How many times have you heard someone say “If I had known these things about saving money twenty years ago…”? Unfortunately, when we are in our teens or early twenties, many of us don’t really want to hear much about saving or retirement. To most teenagers, forty year olds are ancient, and money is simply a means to acquire ‘stuff.’ But what if young people were given an early start to understanding their finances? How great of an impact would that have in getting them to start thinking about their financial future?
The key to long term investing is simple mathematics: the longer your money has to grow, the bigger your returns will be. This is why it may take someone thirty years to acquire a million dollars, for example, and then the million doubles in just a few years, then in a few more years, it doubles again. The trick is to get your children interested in this, motivate them to learn, and then keep them disciplined. Here is one way to do it.
Play to Their Interests
Teenagers are interested in things they know. They know about their favourite brands like Coke, Apple, McDonald’s, The Gap and so on. They know these companies’ products, and they will often be more interested in learning about these businesses as a result. Work with your children to pick a public company they are familiar with and purchase a few shares in one or more of these businesses. Then track the stock’s performance over time.
This process accomplishes four things:
- It helps kids understand the value of saving and builds the discipline necessary to put money aside.
- It encourages them to understand how businesses operate (and, if they’re really ambitious, how to understand annual reports).
- It teaches kids how compound interest works.
- It develops an understanding of the relationship between stock prices and the value of a business.
Make Saving Money a Habit
In addition to developing an interest in investing, you can also get your teenagers or younger children into the routine of putting aside a set amount of money on a regular basis. Once this pattern is set in their minds, they tend to carry on with this disciplined approach into adulthood.
Taking the time to teach your children the basics of saving and investing early on may be one of the best ways to ensure they start their adult life on strong financial footing. And in those trying teenage years, teaching them how to ‘get rich’ may even make you appear a little bit cooler in their eyes. If nothing else, it will help you sleep a little bit better at night, knowing you’re helping your kids get off to the best start possible.
This article was sponsored by WN Wealth Management. At WN Wealth Management we’re committed to helping our clients work towards their retirement goals. For a no obligation, detailed retirement review, please give us a call at 604-643-0118 or [email protected]. www.wnwealth.ca.
WN Wealth Management is an advisory team at Canaccord Genuity Wealth Management, a division of Canaccord Genuity Corp., Member-Canadian Investor Protection Fund.
This article is solely the work of the author for the private information of clients. Although the author is a registered investment advisor at Canaccord Genuity Wealth Management (“CGWM”), this is not an official publication of CGWM and the author is not a CGWM analyst. The views (including any recommendations) expressed in this article are those of the author alone, and are not necessarily those of CGWM.
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