From piggy bank to commercial bank

By Axcel Finance

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Although children may not have the same levels of income as their parents, it’s never too early to begin educating them about how they can invest their funds so they can learn how to save for essential and fun purchases while building up a fund of money for a bigger target in the future.

Banks, credit unions and other institutions will often offer an incentive for children to open a savings account. The enticement may be an attractive savings jar or if they open the account with an investment of a certain amount, a few dollars will be added to the account as well as a gift from the bank.

Nevertheless, careful research should be carried out by the children so they can assess the benefits from each institution and compare those to the potential fees and charges that may be imposed over the course of time. This helps educate children that savings and investments are not entirely free of charge, but by careful research they can seek out the best deal that meets their own needs.

Children can be shown and educated in a range of financial concepts. They will learn how they can save regularly while avoiding high fees. They can set their own goals and targets and manage the risk levels required with their individual choices of investments.

For children who show an early overactive interest in investing to make money, they can invest hypothetical dollars with individual stocks and shares in well-known companies that they are regularly in contact with through games, clothing or fashion accessories, as it will be easy for the children to relate to the company names.

They will be able to see how prices of the stocks rise and fall and the total value of their investment at any given time. There are a range of apps that will bring them both instant information and up-to-date valuations.

A Gallup poll recently suggested that only 50% of Americans invest on the stock market and they are mostly through retirement plans. This means that any of the other 50%, who are able to invest, are missing out on one investment opportunity route that might bring them a good return on their money over the longer term.

By practicing with fake money, children will learn the effects of investing within a wide range of safe to risky funds, which may help them develop an intuition in the future of which funds to invest in, when to buy and when to sell.

This will help develop children into sensible adult investors. They will learn what amount of their income can be used towards short-term savings and long-term investments. They will see how much time is required to manage their money as well as getting on with everyday life.
Where children are to become comfortable with savings and investments as well as planning for unseen circumstances and large purchases like vehicles and a home, monopoly will not teach them as much as you can by showing the real effects of passive investing.

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The writer is the founder and CEO of Axcel Finance Ltd., the leading regional microfinance institution. Share your thoughts and email your questions to [email protected]

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