While most adults are interested in the idea of making their money work for them, they may be a bit leery about entering into the daunting world of investing. Of course, certain investments like retirement accounts and purchasing property seem to be well within the grasp of the average adult, but when it comes to stocks and bonds, for example, most people feel like they don’t have the first clue as to how to proceed (and many are afraid of the risks involved). But if you want to have money to carry you through retirement and leave a little something for your kids, it behooves you to make the time to learn about investing so that you can make informed decisions. And you can give your kids an even better gift by taking them along for the ride so that they can also invest when the time comes. Here a just a few guidelines to help you get started.
- Learn as you go. If you’re going to teach your kids how to invest responsibly you need to know how to do it yourself, which means an ongoing education in finance is a must. You should learn about the different investment opportunities available to you, including the risks and rewards that each entail, and then strive to put together a diverse portfolio of stocks, bonds, mutual funds, and even CDs or collectible items (coins, for example) that will make your money go further.
- Get some help. There is an entire profession devoted to helping you invest your money wisely so you should take advantage of it rather than going it alone. It’s not easy to find a stock broker that you can trust, but you can pave the way by getting referrals from family and friends and then starting small with a new broker until you’re sure his/her advice is legit. Look for someone who is available (takes your calls or calls you back expediently) and is always willing to answer your questions.
- Open savings accounts. A good first step to get the whole family involved in the idea of investments is to open savings accounts. Before you can teach kids about investing they have to learn about the value of saving money, and starting them young with a savings account for their allowance is essential to teaching them good financial habits for life (the money they save today can be invested tomorrow).
- Self-directed Roth IRAs. Investing as a family doesn’t have to be limited to helping your kids learn the ins and outs of the investing world. Suppose a sibling is opening a business and is seeking startup capital. One great option for family members to invest in the business (and in their own future at the same time) is through a self-directed Roth IRA. You will take control of managing your retirement funds so that you can determine how they are invested. Then you can place a portion into your sibling’s business (and put the rest into low-risk mutual funds or whatever you deem fitting). As the business grows, your initial investment will be paid off with interest.
- Build credit. Good credit is essential for some types of investment (purchasing an asset like a home, for example), so you should help your kids to plan for their investment future. Rather than getting kids prepaid cards (like a Visa debit card or a NetSpend card, for example), think about helping them to get a secure credit card through your bank (with collateral) so that they can start building good credit immediately. This will not only teach them the value of credit early, it will help them to start their financial lives on the right foot.
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