BMO InvestorLine: Back To School Season-A Great Time to Teach Kids About Money and Investing
TORONTO, ONTARIO--(Marketwire - Aug. 31, 2012) - As children across the country get ready for the start of a new school year, BMO InvestorLine suggests that it is an opportune time for parents to start teaching their kids about the basics of investing and saving for the future.
"Learning doesn't stop when the school bell rings at the end of the day," said Cesar Rainusso, Vice President, BMO InvestorLine. "It's never too early to introduce kids to the world of finance and that can start in the home. Even very young children can learn basic money skills, while older children can be taught about the stock market and the importance of setting financial goals."
BMO InvestorLine offers tips for parents on how to teach their children about saving and investing at any age:
The Early Years: The Value of Saving (suggested ages: 5 to 9)
As soon as children start to collect a few coins and understand the value of money, open a savings account for them:
- Explain to them why saving/investing money is important in life.
- Introduce them to the concept of having a bank account and how money in a bank account earns interest.
- Focus on a specific goal (such as buying a video game or a bike) this can make it easier for kids to set aside the money. Suggest children save at least part of the cash they receive for birthdays, holidays or jobs for something they really want.
- By setting a goal and purchasing items themselves they will develop a better appreciation for the value of saving.
Taking Action: Learn the Marketplace (suggested ages: 10 to 12)
Once the basics are in place, it is time to start learning about investing:
- Educate children on the concept of risk and the importance of having a balanced investment portfolio - use language they understand and keep to key, simple concepts.
- Explain that purchasing a stock means they own a small piece of a company and the value of the stock can go up or down.
- Show them how to read stock prices in the newspaper's financial pages or online. As homework, have them track the stock prices of a handful of familiar companies, such as Walt Disney or Tim Horton's, to make the exercise more interesting and personal.
- Decide together how frequently they will check the stock prices (once a day, once a week) and then show them how to keep a log of the price changes to see how well their selections have performed.
- If you have an online investing account, walk them through your portfolio and explain to them the rationale for your portfolio's composition and any trades/changes you make.
Getting Real: Becoming an Investor (suggested ages: 13 to 19)
- Once the groundwork has been set, have kids invest a small sum of money in a few stocks they were previously tracking and perhaps offer to match any gains the child makes in their stock picks.
- Consider setting up a custodial account and having the child contribute part of his or her savings. With BMO InvestorLine, parents are allowed to set up an account on behalf of children who are under the legal age of majority.
- Teach kids about the different savings and investing instruments available to them, such as: a Registered Education Savings Plan (RESP), used to save for post-secondary education; a Registered Retirement Savings Plan (RRSP), for saving for retirement; and a Tax Free Savings Account (TFSA), to build up a contingency fund or save for a larger purchase such as a post-graduation trip or car.
- Explain that the younger an investor starts to put aside and save his/her money, the more time his/her money has to grow.
"The most important lesson of all is to make learning about finances fun for kids," said Mr. Rainusso. "With some instruction and hands-on experience, you may have the makings of the next Warren Buffet living under your roof!"
For more information on investing, please visit www.bmoinvestorline.com.
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Rachael McKay, Toronto
Valerie Doucet, Montreal
Laurie Grant, Vancouver