How to Teach Your Teenager About Investing

"But Pauline, I don't even know how to invest. How am I supposed to teach my kids about investing?"

Each time I tell a parent that they should educate their children, especially teenagers, about money and investing, I would get this answer more than half the time.

Actually, it's really not as hard as most parents would imagine.

If you're wondering how to teach your teenager about investing, there are plenty of ways to do so, even if you don't know how to invest yourself.

See also: I'm Pauline Teo, and this is my story

When our parents were young, they were mostly expected to just work hard to earn their money. They weren't taught anything about investing, which is why we were not taught investing as children either.

On top of that, the education system only taught us how to get good grades in school just so we can land a great job as adults, but not how to manage and grow our money passively.

However, as the country and global economy grow, it is getting more and more difficult to keep up financially, to a point where hard work is not going to cut it anymore. At this rate, if we and our children don't invest, we just might need to work until the day we die.

That's why, if we want our children to survive and be able to fend for themselves as they grow up, we will need to equip them with the right money management skills.

Teenagers, especially, are great at picking up the concept quickly, and with them starting to understand the world more at their age, there is plenty you can do to educate them.

How to teach teenagers about investing

Here are five tips on how you can teach your teenage sons and daughters all about investing:

1. Emphasise price and value

Often mistaken for each other, price and value are actually two very different concepts.

Price, as we know it, is the amount you pay for a product or service. Price, however, does not always reflect a product's real value. Value, on the other hand, is a product's worth.

To further illustrate these concepts, let's take chicken rice from a food court for example.

If an ordinary plate of chicken rice is sold at $10, would you buy it? Likely not. 

But, if the same plate of chicken rice is sold at $3, would you get it? Yes, and maybe you'll even get a few packets extra to take away.

If you can understand what I'm saying, it's because you understand price versus value. The plate of chicken rice, like all products and services, has a value attached to it.

This concept is the number one place to start if you want to teach your teenager about investing.

2. How to pay themselves first

If you've heard me speak or read my articles before, this will sound familiar to you.

A lot of us were taught since young to first spend our pocket money and then save the remaining when we should really do it the other way around.

"Pay yourself first" simply means that with every paycheck that you get, you should always set aside at least 20% first for your savings. This way, you're paying your future self before you pay everyone else, such as your bills, mortgages, and leisure activities.

This is also one of the top money concepts we should instil in our children before anything else because otherwise, they won't even have money saved up to start investing.

3. Education before action

It is almost ridiculous how many people I've seen rushing headlong into investing, without having a clue what they're doing. Zero investing knowledge!

You wouldn't enter your children into a football competition without them first learning how to play and getting them to practise again and again.

So, why would we, as adults, invest our hard-earned money without first getting a deep understanding of what we should do?

Instead of worrying about how to teach your teenager about investing, you should educate them on the importance of educating themselves, especially on subjects that are not taught in school, like money management and investing.

This way, they will be conditioned to equip their minds with the right knowledge before undertaking anything important, even as adults.

4. Go window shopping (even the boys!)

Stock investing is essentially buying into a business and its operations. Apple, for example. Or retail brands such as Nike.

So, bring your teenagers for a walk around the mall. Wander into the Apple stores or Nike stores. Is the business doing well? If so, you can be sure that their stock's value will also appreciate, you may even consider investing in them.

If the business is not doing well, observe and learn what happened. Has the brand quality gone down? Did something happen to them recently?

By doing this, you're teaching your children to see a stock as a business, rather than just a stock. And once they do, it will be much easier for them to grasp the concept of investing, because they will already have it in their heads that when they invest, they're putting money into a business they can observe.

Must-Read: Investing for Beginners in Singapore

5. Talk about value appreciation

For most products, their value or worth will depreciate once bought or used. Clothing, for example, or most diamonds and luxury bags.

However, some products defy this rule and appreciate in value over time, despite having been bought and used by someone else. 

Rolex, for example, has a few models that have appreciated in value over time. The same applies to handbags, cars, and a few other brands of watches, so much so that a lot of people have even bought them as investments.

Teaching your teenagers about value appreciation and depreciation in products gives them a glimpse of how the economy works, supply and demand, exclusivity, as well as price.

It also helps them to see the value of things, learn how to manipulate trends, and use it to work for them instead of against them in the future. 

Investing is a simple (but not easy) concept made complicated over the years with many tactics, new "strategies," and difficult-to-understand guessing games, when it's really just about identifying a valuable business and riding on it to grow your money over time.

Parents who want to know how to teach their teenagers about investing must also first grasp the concept yourself so they can share the right knowledge. There are already far too many people who are losing money in the stock market right now because of a lack of knowledge.

So if we don't want our children to be a part of that, we should also make sure we get it right first. You’re invited to come to our free online bootcamp, and we’ll teach you to do just that. See you!

~ Pauline Teo