I have recently had the pleasure of setting up custodial stock market accounts for grandchildren. I knew this could be done because we learned about it when setting up stock market accounts for our (still at that time) minor children. I was also inspired to do it because my dear mother-in-law bought savings certificates for her grandchildren each Christmas until they turned 18. I am going to modify this excellent idea and set up a stock market account for each grandchild when they turn one year old (they really don’t care if they get anything else at that age), then donate to it on each of their subsequent birthdays. As they get older, I will be able to involve them in the process and knowledge of what is going on.
But we started with our own children. Not until they were older, because it just didn’t occur to us until the oldest kids were already teenagers that we could do that with them. There was also the fact that the internet made personal investment management much easier and less expensive. In retrospect, there were also a few other things we were already doing that made it an easy step, and some things that we learned right about then that resulted it us realizing the potential for them. This is how it started:
1. When our kids were young, we adopted a system of chores and allowance that was simple and would help teach them about money management. Our method was to expect daily chores, already outlined for them on a weekly chart. Since they were taught at home, there was no conflict with other school schedules. The allowance was not directly connected to the chores (i.e. they were not paid per chore), but was based on their ages. Every month they got as many dollars as they were old. Simple. If they did extra work for us, beyond the expected chores, they would get paid according to how we evaluated the level of their work. They knew it wasn’t just a way to make them work harder, but also a fact that reflected their experience and capabilities. It was well understood that they were still accountable to us for what they did with their money, and they appreciated this, as they knew we had their best interests in mind and hoped to guide them to learn how to make good decisions. They were required to save one third of it, set aside a small portion to help others, and the rest was discretionary. It was interesting to see them each work through the possibilities and limitations of their “budgets.” This allowance system was an unintentional casualty of a family health crisis before the younger kids got full “benefits,” but without any apparent bad side effects.
2. As my husband and I transitioned to internet stock market management, we learned more about the whole process, and the kids saw us learning. That was great, to a point, but without explanation, the kids had no idea what we were really doing other than “adult money stuff.” Since we were already in charge of their whole education, it wasn’t a stretch to think about teaching them this new thing we were learning. We knew we were not experts and had a lot to learn. We made it clear to them we were not experts, which stimulated them to both do their best to learn from us and to try on their own to understand some things. Not all of them were equally interested or at ease with the process, but they all got involved to some degree or another.
3. Along the way, I began to see how a better understanding of economics would help me with investment decisions, both for basic concepts and because of how economics is distorted and manipulated by politics. I began with Thomas Sowell’s book Basic Economics, which felt like someone turned on a light in a dark room. I had begun feeling intimidated. Within a short time, I felt liberated and informed. I discussed things with my husband and passed on this new knowledge to our kids, even the ones who were officially graduated from high school. It made sense to all of us.
4. This new grasp of the principles and realities of economics made investing not only make sense in terms of the mechanics of investing, but why our personal investing was good for everyone involved in our economic sphere. I was not only freed from the remnants of guilt that the politically correct, socialist mentality of government schools uses to enslave us, but I saw how wise saving and investment habits were good for everyone in society. I passed this perspective on to our kids. This point needs to be emphasized. It is hard for even home educated kids to pick up on this by themselves. The ideas of socialism are embedded into much of what goes on around us in our culture. I remember noticing that even the bulk of homeschool curriculum offered questionable history and economic “facts,” because those who wrote them had not escaped as much as they thought they had from what they were taught in educational establishments firmly directed by government perspective. If we parents do not made a significant effort to discuss and expose the lies that abound, our children will likely end up confused at best or dedicated to the wrong theories at worst.
5. Now, we all began reading strange books like Dividends Still Don’t Lie and The Basics of Understanding Financial Statements. Even my younger teenagers became intrigued with the possibilities and subject matter. They asked us to explain more than we knew. We all learned new things together. We re-evaluated math courses for our kids who were still studying at home, seeing a course in accounting as quite likely more useful than calculus, unless they were going to study engineering in college (one son was).
6. Listing it all like this could make it sound like we were constantly immersed in studying economics and the stock market, but we weren’t. We were more regular about economics, but it was also more relatable on a daily basis. We sometimes read through an economics related book during our lunch time reading (I mean a few pages a day until we were done with the book. It was our habit for years to read through one story book and one informational book while the kids ate), and I dug up occasional current articles on subjects that were relevant for us to discuss. Really, even the pirates from Somalia has a strong economic element. It was fascinating! For stock market things, though, it was more relaxed and spread out, especially the purchases. They didn’t have a lot of money and we were teaching them the “buy good value and hold” approach. We were teaching them that investing is not gambling.
7. Now, our kids are excited to see me begin this early with their kids. I look forward to explaining a little more each year to the grandkids about what this “strange” annual birthday gift is. I want it to be second nature to them, like when a child learns a foreign language early and it is intuitive for them to speak.
I hope through my telling of how we did this you can see that we have learned much right along with our kids. I expect I will keep learning. You do not need to be an expert on the stock market and investing to teach your kids about it and get them off to a good start. You just have to be willing to learn about it and give it a try.