4. Teach your child about the stock market. Once children understand basic math like addition, subtraction and multiplication, understanding how to invest in the stock market isn’t that far off. Explain how the stock market works in very basic terms using stocks of products your child is familiar with such as Disney (Stock Quote: DIS). Help your child track a stock for a short period and do the basic calculations to determine if an investment would make or lose money over that period.
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5. Help your child start investing. Once your child has an understanding of the stock market, help her set up a real investment. The funds can come from your child’s investment savings, or you can provide some seed money or matching money. Track how the investment performs regularly with your child. If your child has a part-time job, consider starting a Roth IRA to teach the importance of saving for retirement. Investing in a Roth IRA early can teach a valuable lesson about compound interest and provide a solid start for future retirement savings.
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