Make It Matter, Make It Happen, Make It Last

Guest post written by Jennifer Streaks, Financial Expert and Writer for HuffingtonPost Money

Teaching your children about investing is important and is another building block in their financial development. A good time to get started is when your child is a teenager.

Start with the Basics:

Sit down and talk with your teen about your own investment strategy and why you think investing is important. Explain that saving is typically for short-term goals and investing is a strategy that can help them reach long-term goals.

Now incorporate the concept of risk. Teens should understand that investing offers higher returns than simply saving because there are risks that come with investing. This is also the time to explain that due to this risk investing is often for the long haul.

Next, have a discussion about diversification. It’s important that teens know not to put all of their money in one place. Also, diversification provides the benefit of reducing the risk  that can be associated with investing.

Practice:

Try this experiment before actually investing any money: Sit down with your teen and have them pick out stocks and follow their performance. It helps if they invest in companies they are familiar with and this will also keep interest up.

You can use the traditional newspaper to track these stocks and there are also investing games and tracking websites online. Watch out for stories or events involving the stock and discuss how news can impact a stock’s performance.

Actually Invest:

Time to move on to the real thing. Until your teen is at least 18 or even 21 (depending on where you live) they will not be able to open a brokerage account. A great alternative is a custodial account which is set up and controlled by an adult for the minor.

This will also be a good time to discuss commissions and service fees. As the statements come in, sit down with your teen and discuss how the investments is performing and why.

Final Act:

Teaching your teen about investing is making your own investment. Teens who get in the habit of investing at an early age are more likely to become financially responsible adults.

Jennifer Streaks has developed programs teaching basic financial strategies through her new monthly blog, Dollars & Streaks. She is also a noted HuffingtonPost contributor and is writing her debut book titled Digging Your Dreams Out of Debt; a book that focuses on financial management and addresses credit issues, retirement and investing, and avoiding financial pitfalls.

For more information on Jennifer, please visit www.JenniferStreaks.com. You can also follow her on Twitter @JStreaks.

© WealthQuest for Teens, Ltd., 2012 All rights reserved worldwide.