Getting started with the stock market, and developing an interest in it, is a great way to get your teen thinking about money and the future. Whether they decide to invest or not, it’s worthwhile understanding simple ways to build your child’s familiarity with the subject.
This can have a wide-ranging impact on how they use their savings in the future, how confident they feel when talking to financial advisers, and what sparks their interest if and when studying Business in school.
Having worked with thousands of teenagers at Savvy Teens, Susan Hayes Culleton says she has found that many young people are intrigued with it and how it works. In fact, an introduction to investing takes up a whole third of her latest book ‘Money Matters’ tailored for young people right across Ireland.
How to Teach Teens About the Stock Market
Share Prices
The best way to get kids interested is to show them the graph of a share price for a company they use a lot.
For example, most teenagers today are on Instagram. They may not know that Meta owns that company (even if they’re Meta or FaceBook users themselves). It can be interesting for them to see how the share price has changed over the timeframe that they have been using it.
Often, when Susan gives this scenario to a group of teenagers, they wonder how Instagram makes money since its a free app! That leads to a whole other conversation around the business models behind social media. You can lead them further then by comparing how much it has changed relative to others, i.e. Twitter or Snapchat.
Interactive Tools
Rather than try to pick the “right stock” or focus on short periods of volatility, at the beginning it’s a good idea to consider how the stock market has performed over time.
The Blackrock Asset Return Map is an interactive visual that points out exactly how all the things you can invest in (stocks, bonds, commodities, cash, etc) have performed over the past decade.
You can compare US stocks to European stocks when you click ‘Relative to Zero’ on the display button. This is a good way for them to test out ideas and compare what would have happened to money invested in different parts of the world.
How to Build a Watchlist
There is no greater education in the stock market than when you buy your first stock. Susan says she remembers it vividly, it feels like you have some “skin in the game”. The next best thing is to have a watchlist and to monitor it prior to investing.
Sit down together and create a watchlist on Google Sheets with the stocks that they’re familiar with, as mentioned in the point above. Agree on a time that you will check in regularly on this and have a chat about what might have happened to cause those changes.
Doing this consistently will cultivate a space your child associates with financial education or, even just that special time to talk about what’s important to them.
Help Them with Their Wishlist
Ask your teen to pick out the characteristics of a stock that they would ideally like to have. Some might say that it gives lots of income each year. Another suggestion might be one that “makes a load of profit”.
Next, help them build their on screen dream portfolio. The first wish could be translated into a dividend yield greater than 3%. The third might be that the earnings grow by 20% per year.
Have fun with this search and show them that it can be a very efficient process to find what they’re looking for… when they know what they want.
Risk and Reward
Investing in the stock market can be an exciting way to teach teens about risks and rewards.
“The stock market is just one big shop. Instead of buying a chocolate bar in that shop, you can buy a piece of the company that makes chocolate bars. If the company that makes the chocolate makes a profit, it’s worth more, and the price you bought it for may go up. Maybe that company will decide to give the profits directly to the people who own the shares and that’s called a dividend. If the company makes a loss, which can happen, the share price can go down, that’s called a risk,” explains Susan Hayes Culleton, CFA, “The Positive Economist” and author of Money Matters.
Help your teen to make an informed choice by using the options suggested above. And remember to explain the risks involved with this type of investment and how they should only ever invest what they can afford to lose.
Money Matters
Susan Hayes Culleton is the author of Money Matters, a financial literacy textbook with the support of CFA Society Ireland. It is written as menu of personal finance, investing and entrepreneurship life skills.
The book is tailored for young people in the following ways:
- It is story-focused whereby students can learn about pensions through characters like Sarah who starts her first job and is wondering what “tax relief” means for her.
- It is full of relevant modernity including ESG, fintech, online brokers, differentiating between trading and investing as well as using technology for active learning.
- It gives a real taste of the diversity of careers available today and tomorrow in finance. Each chapter contains a case study of a CFA Institute charterholder and highlights how the the theory learned in subjects like accounting, business, maths and economics connect with the practicality of everyday life and life-changing decisions.
Find out more and buy your copy here so you can start talking to your teen about money and finances.
About the Author: Michelle
