Financial Planning Fridays #185: Teaching Your Children About Investing: Where to Start

Hi friends. Today I want to talk about something I hear from other parents all the time. How do you teach your kids about investing without accidentally creating entitlement? Because we want our kids to understand money and build good habits, but we also want them to stay grounded, grateful, and hardworking. So here are a few simple ways to do both.

First, teach them the why before the wow. A lot of parents start with the numbers. If you invest a thousand dollars, it could become ten thousand dollars someday. That's true, but kids don't connect with the math first. Instead, start with the purpose. Investing is how you build freedom, options, and security over time. It's not about showing off, it's about being prepared.

Second, make investing something they earn. One of the best ways to avoid entitlement is this: don't just give your kids money to invest, create a system where they earn it. That could be chores, extra responsibilities, helping neighbors, summer jobs, anything tied to effort. Then you can say, "You've earned this. Now let's help you grow it." That lesson sticks.

Third, use a parent match to reward good habits. A great strategy is a parent match, like a 401(k). For example, if your child invests fifty dollars, you match twenty-five dollars. This teaches two big things: consistency wins, and rewards come from effort. It's a powerful way to encourage investing without making it feel like a handout.

Fourth, keep investing boring on purpose. This is important. Successful investing is not exciting. It's not about chasing hot stocks or trying to get rich quick. It's about staying diversified, investing consistently, holding for the long term, and ignoring the noise. If your child learns that early, they're way ahead of most adults.

Fifth, let them make small mistakes early. Another key to avoiding entitlement is allowing your kids to experience real outcomes. If they invest $100 and it drops to $85, that's a lesson. If they panic and sell too soon, that's a lesson. Better to learn those lessons with small dollars now than big dollars later.

At Presilium, we have set up hundreds of investment accounts for our clients' children, grandchildren, and other important young people in their lives. Please reach out to us if we can help those closest to you. Thank you, and I look forward to talking with you next Friday morning.