Benefits of Investing in Early Childhood Development

What do children mean to their parents?

Well, children mean the world to the parents. Parents want their children to stay happy, healthy and away from troubles.

In order to do so, some parents start financial planning for their children even before their birth. In order to save money for them, they look for the best investment plan for them.

That being said, many parents face challenges in financial planning for different stages of their children, be it education or marriage. Some parents teach the importance of saving and investing to their children since their childhood.

What if, your kids also save at their early stages of life?

As a parent, let’s see how you can, teach your children the habit to save for the future and, specifically, how to invest.

The plan comes down to three parts: an implicit stock investing game, a bank account, and a simple-to-use ‘real’ investing account.

Here’s a three-step guide for you to teach your children how to invest – and why:

If you are a 90’s kid, your savings were then the key formula for you to save was very simple. When you got your pocket money, you saved a portion in your piggy bank. Once your piggy bank had sufficient savings, you headed down with your parents to your bank to open a savings account.

Back then the rates of interest were very low.  For a child with the savings account (who wasn’t aware of the term ‘inflation’), things were better. The rate of interest was lower than 2%. After a couple of years, it was increased up to 10%.

Also Read: How to Start Investing for Your Newborn Child?

But, what about the current scenario?

As per the Bankrat.com’s data, the average interest rates offered by a saving account in the US is not more than 0.25 per cent annually. That means your children will have to wait for months to see their money grow with accrued interests.

Lesson #1: Is Investing in Banks a Wise Decision?

Because of their low interest rates, banks aren’t considered a good option for investment. Given that, the parents may find it difficult to convinced their children that investing in a bank has a bright financial future. But, how are banks helpful?

No doubt, a bank is a great place to keep your money safe and easily accessible. It might be the best place to maximise your wealth as well. This is the reason the first step of cultivating the habit of saving starts with opening a bank account. But does it really work? Due to the low interest rates offered, the money grows at a slow pace. Today, even paint dries faster than a savings account earns interest.

That’s why you need to introduce your children to the other available options to grow money

Lesson #2: “Gamify” the Investments:

In comparison with the low-interest rates of savings accounts, the 9 percent growth rate of the United States stock market seems a rocket ride to the moon. Obviously, some children can afford to purchase stocks with their pocket money or allowance – even though they’ve babysitting or lawn-mowing gig on the sides.

So, how would you teach your children the benefits of making investments over mere savings?

Here is the deal!

You can set up a virtual portfolio including play money. How can you do it? Well, Motley Fool CAPS is one such great place. With this, children along with parents can purchase individual stocks virtually. They can even see the performance of these investments in real time – rising today, falling tomorrow. The long-term performance of such investments is also monitored.

CAPS provides a way so that you can make your kids aware of the concept of investing. This might be one of the safest ways to do as no real money is involved in it.

Lesson #3: Real Money for the Tech-geek Generation:

After trying out the selected stocks on CAPS, you might allow your children to try investment of real money. Granted, your kids may not have substantial savings to initiate an account at Fidelity or Schwab. However, there are a few stock investing services available on the internet that allow small investments.

One such service is Robinhood investing app. This is one of the best-suited apps for today’s generation, who’re familiar with operating various apps on their smartphones.

There is no fee for initiating and maintaining an account. It also allows you to trade the stocks for free, whether you’re selling or buying.

Also Read: Child Investment Plans You Need to Choose Wisely 

Has something big happened?

David Gardner, co-founder of Motley Fool, along with his brother, Tom Gardner (CEO), disclosed two new stock recommendations. Mutually, they’ve made the return of the stock market threefold, over the past 13 years.

Conclusion:

Investing at an early age is a great advantage for your children. If your kid is aware of the basics of investments, it’ll be an additional advantage. In this regard, this article will aid you in guiding your children to understand investments in a better way.

About Sashi 55 Articles
Sashi Singh is content contributor and editor at IP. She has an amazing experience in content marketing from last many years. Read her contribution and leave comment.

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