Here at SparkGift.com, we're big believers in sparking investment journeys as soon as possible.
There's no shortage of rationales for our early-investing fervor. The fact that habits formed in childhood are more likely to persist throughout life, for one, meaning kids who learn investing early are more likely to save and invest throughout their lives. Then there's the magic of compound interest's mathematics and the exponentially greater returns a portfolio sees with an early start. You can't play catch-up when it comes to investing, so starting those returns early is golden.
Mostly, though, we just love investing, and we know that it can do great things for kids, too. So we've put together this list of eight reasons we think the kids in your life should know about investing—let us know if we missed any!
Instant gratification is something many kids—and many adults, too—have trouble foregoing in favor of long-term gains. The payoffs of prudent investing are so enormous that it's hard to ignore their reality with any basic grasp of arithmetic, though. When you can hammer home the point that letting that one small purchase go now will enable bigger purchases in the future, you've managed to make a lifelong saver. It's a lesson that's worth the years of explanation, we promise!
Childhood is all about emotional highs and lows; the smallest things can lead to shrieks of excitement or screams of panic. Too many investors keep those attitudes into their adulthood, overreacting to every bump and blip in their portfolio and selling and buying emotionally rather than to their long-term advantage. Teaching kids not to sweat the small stuff when it comes to investing will help them take a similar approach to life, and they'll be happier people for it.
It isn't just that many people buy and sell emotionally. The inability to just relax and let things be—to stick to the plan even when your impulses tell you otherwise—is another problem people face in many areas of their lives, investments included. The discipline to get informed, then to buy and hold for the long haul, is something most novice investors lack and it can severely limit their wealth potential. When kids learn the discipline of holding still early on, they'll make better decisions in all areas.
Every choice in life is a trade-off. In economics, this is called an "opportunity cost"—the things you have to give up in order to get the thing you want. Jumping on the furniture might result in a time-out and a missed opportunity to play, for example, and "I hope it was worth it" is a phrase that springs from many a parent's lips. Investing teaches this principle in clear black and white (or black and red), with each investment choice precluding others and chance to go back and correct "mistakes." Long-term investors take a zen approach to hindsight and learn to be happy with the good choices they've made, and kids can learn that, too.
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