Today’s teens and young adults are more interested in investing than ever. A key question is, “Who’s teaching them?”
As I wrote in Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management, it isn’t that if we don’t teach our kids about money they won’t learn. They will learn, but our consumer culture will be their teacher. Far better for us to do the teaching.
Like a moth to the flame
In recent years, there’s been a surge of interest in investing among young people. In the pandemic years, millions of new investment accounts were opened, many by young people. Schwab dubbed them “Generation I” (Generation Investor), pointing out that in 2021 a remarkable 15% of all investors began investing just one year earlier. More recently, Schwab found that 70% of teens age 13 to 17 are very or extremely interested in investing.
What’s drawing so much interest? Unfortunately, to a great degree, it can be attributed to social media “influencers” telling their followers there are quick riches to be had in the casino called Wall Street. The rapid rise of online sports betting and prediction markets is only fanning those flames.
Hence, the urgent need for parents to teach their kids how to invest.
A starting point
Kids can understand a lot about various financial topics, including investing, at a younger age than many parents may realize. To generate interest in the topic, ask your kids, “Why just buy what all the other kids buy when you could buy the companies that make what all the other kids buy?”
From there, help them understand that some companies are “public” companies, which means that they can become part owners by buying stock. And today, with fractional-share, no-commission trading, they can invest with as little as one dollar. That’s amazing.
Why would they want to? Because investing is one of their responsibilities as managers of God’s resources. Everything they have has been temporarily entrusted to them to be managed productively for God’s purposes according to His principles. By investing wisely, they can save for college, a house, or their later years far more efficiently than by using a savings account.
Biblical perspectives
While the Bible won’t teach your kids the difference between a traditional and a Roth IRA (that’s where you come in!), it does provide some important principles related to investing, including:
Diversification. Read Ecclesiastes 11:2 with your kids. “But divide your investments among many places, for you do not know what risks might lie ahead.” Help your kids understand that investing in multiple companies is an effective way to manage risk. The easiest way to do this is by investing in mutual funds or exchange-traded funds. For as little as a dollar, they can gain small ownership stakes in hundreds of companies. Again, amazing!
Patience. Investment success favors those with a long-term perspective. The Bible contains both a caution against the pursuit of quick riches and a promise for those who take the long-view. To the impatient, it famously says, “For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs” (1 Timothy 6:10, emphasis added). To those willing to take a longer-term perspective, it says, “Steady plodding brings prosperity” (Proverbs 21:5, TLB), followed by this additional warning for those in a hurry: “Hasty speculation brings poverty.”
A huge advantage
Your kids may not have a lot of money right now, but they have an abundance of time — an asset that many older, wealthier people wish they had more of. Teach your kids about compounding and the crucial role that time plays.
For example, if they invested $50 a month for 50 years and generated the stock market’s long-term average annual return of 10 percent, they will have invested $30,000, but that money will be worth over $700,000! However, if they wait five years and invest for 45 years instead, they will invest just $3,000 less, but they will end up with about $250,000 less. Wow — quite a penalty for waiting just five years.
What have you done to get your kids started with investing?
