Teaching teens about stock market, mutual funds etc

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rm
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Teaching teens about stock market, mutual funds etc

Post by rm »

I have a teen and I want to give him financial education. What is the best way to start?

Obviously he will not listen to his parents but if there is any website/book you can recommend I would love to get your suggestions. Want to make him understand how stocks and bonds work and how mutual funds/ETFs work as well.

Also, I couldn't open a brokerage account in his name but what I have done is earmarked some money for him in my brokerage account so he will tell me what to buy/sell and when. I will then execute on his behalf. I wish there was a way to just give him an account separately and transfer some money there but I haven't had luck with my 3 main firms - fidelity, vanguard and wellsfargo.
theorist
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Re: Teaching teens about stock market, mutual funds etc

Post by theorist »

This book seems like it might be especially appealing for a young person

https://www.amazon.com/Second-Grader-Be ... oks&sr=1-1

(though I can’t claim any special insight into the psychology of teens!)

If he likes things more targeted at adults, there are some excellent short books by John Bogle and by Charles Ellis. For instance:

“The little book of common sense investing” (Bogle)

“Winning the losers game” (Ellis)

A slightly more sophisticated, slightly weightier classic on the subject is Burton Malkiel’s “A random walk down Wall Street.” It isn’t so much directed at personal finance as at gaining an overall understanding of what is going on in markets.
Last edited by theorist on Thu Feb 20, 2020 12:32 am, edited 1 time in total.
mega317
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Re: Teaching teens about stock market, mutual funds etc

Post by mega317 »

Is he interested at all? Can't make him listen to his parents or anyone else teaching the thing his parents want him to learn. Based on no evidence or experience, I don't think that letting him trade willy nilly is going to teach him much. Investing is a long term thing and you can't learn it simply by being hands on like you can many other things. I also think much more important than stocks/bonds/mutual funds, a kid needs to learn about saving and debt. Then learn where to put the savings when he's older and actually has some.

The Little Book of Common Sense Investing is what really opened my eyes. I was a little older probably 23 or so when I found it.

My children both had accounts at Vanguard before their 1st birthdays so I'm not sure what your trouble has been there. UTMA.
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Sandtrap
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Re: Teaching teens about stock market, mutual funds etc

Post by Sandtrap »

Start with the "chickens and eggs" metaphor. . .

then move on to the . . .

"Fruit orchard and fruit metaphor". . .

It's a foundational financial concept that applies to investments and business in general.

IE: Stock shares = Chickens
Various stock shares = Chickens of different types, some lay more eggs but are more fragile.
Dividends = Eggs
. . . Harvest Eggs, Don't eat chickens, Use and also sell some eggs to buy more chickens, the value of the chickens goes up and down but doesn't matter as long as you own them and harvest eggs.
. . . So, slowly, you become a successful chicken farmer with loads of chicken coups. . . . etc.

*substitute freely for; chickens, fruit trees, chain of muffler shops, chain of Walmarts. . . .

If the teen says. . "I got it" and then says something unrelated like, "what's for dinner", then go no further. :shock:

I did this to my 2 teenage boys, even when younger. One is still disinterested and struggles. The other was fascinated and is doing great in midlife.

j :happy
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Brianmcg321
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Re: Teaching teens about stock market, mutual funds etc

Post by Brianmcg321 »

JL Collins "The Simple Path to Wealth".
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
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KingRiggs
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Re: Teaching teens about stock market, mutual funds etc

Post by KingRiggs »

Advice = noun | Advise = verb | | Roth, not ROTH | | "Remember, there's always money in the banana stand." - George Bluth, Sr.
Jack FFR1846
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Re: Teaching teens about stock market, mutual funds etc

Post by Jack FFR1846 »

Being the owner of one teenager and one 23 year old still in college, I have to laugh at all these book and website suggestions. Unless you're bringing your son a teenage girl or a slammed car, they won't sit down to listen. Come on. You're not talking to a 50 year old here. What I do is talk about what I do in very, very, very small slices. By osmosis, both my sons have come to me asking how to open a Roth?, what's an ETF?, what would be a starter fund? But this is after years of talking. Both my boys know I've got a good amount saved and we've talked about their friends who's parents have home theaters, wall to wall Mercedes in the garage and in debt up to their eyebrows. Older son's friend's dad was fired from his law job and the mom had to work as a cashier to keep up with mortgage payments. Younger son's friend's parents bought their second Mercedes, then found that the kid needed braces and couldn't do it because they had no money left for that. Seeing first hand life examples seemed to make my words over the years sink in. Older son's girlfriend told him I was a genius because her parents had nothing.....although they did manage to keep their sail boat in the Long Island Sound mooring somehow. I hear they went to a financial planner and learned they have nothing saved for retirement. Again...my son's ears were open and he sought more advice from me with pointed questions, little by little. His Economics professor this term was very impressed when my son stayed after and was talking ETFs and indexing with him.
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Sandtrap
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Re: Teaching teens about stock market, mutual funds etc

Post by Sandtrap »

Jack FFR1846 wrote: Thu Feb 20, 2020 7:48 am Being the owner of one teenager and one 23 year old still in college, I have to laugh at all these book and website suggestions. Unless you're bringing your son a teenage girl or a slammed car, they won't sit down to listen. Come on. You're not talking to a 50 year old here. What I do is talk about what I do in very, very, very small slices. By osmosis, both my sons have come to me asking how to open a Roth?, what's an ETF?, what would be a starter fund? But this is after years of talking. Both my boys know I've got a good amount saved and we've talked about their friends who's parents have home theaters, wall to wall Mercedes in the garage and in debt up to their eyebrows. Older son's friend's dad was fired from his law job and the mom had to work as a cashier to keep up with mortgage payments. Younger son's friend's parents bought their second Mercedes, then found that the kid needed braces and couldn't do it because they had no money left for that. Seeing first hand life examples seemed to make my words over the years sink in. Older son's girlfriend told him I was a genius because her parents had nothing.....although they did manage to keep their sail boat in the Long Island Sound mooring somehow. I hear they went to a financial planner and learned they have nothing saved for retirement. Again...my son's ears were open and he sought more advice from me with pointed questions, little by little. His Economics professor this term was very impressed when my son stayed after and was talking ETFs and indexing with him.
+1
This is really hitting the nail on the head.. . .

When our boys were little, they came over to my construction sites with mom to help clean up on the weekends.
Later, as they grew older, rental unit cleanups and repair by the hour.
Experiental learning.

Baby steps.

j :happy
Last edited by Sandtrap on Thu Feb 20, 2020 7:59 am, edited 1 time in total.
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KlangFool
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Re: Teaching teens about stock market, mutual funds etc

Post by KlangFool »

OP,

My kids give me their savings. I invest in the Vanguard LifeStrategy Growth Fund in my taxable account. When they are old enough, I give the money back to them and they invest the money into the Vanguard Lifestrategy Growth (taxable account) and Vanguard Moderate Growth (Roth IRA) of their own accounts.

They learned that as long as they save money and invest in the mutual fund. The money will grow and they do not have to do anything. That is the key lesson.

Investing is boring when it works.

KlangFool
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Puretaxableindexer
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Re: Teaching teens about stock market, mutual funds etc

Post by Puretaxableindexer »

Teens don't care nor will they listen, they have to figure it out on their own. As a parent, just set good financial examples and use them in conversation with them eventually it may sink in overtime. I was fortunate to learn about stocks back in 5th grade at my Catholic school when my teacher would have a stock picking class with the newspapers and you had to picks stocks and track them week to week.
Most of my classmates loved it because it was different and we didn't have to do schoolwork that day, but it became valuable to me as life went on.
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SmileyFace
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Re: Teaching teens about stock market, mutual funds etc

Post by SmileyFace »

If he won't listen to his parents how do you know he will read a book you buy him :)
Perhaps some Youtube videos.
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retired@50
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Re: Teaching teens about stock market, mutual funds etc

Post by retired@50 »

DaftInvestor wrote: Thu Feb 20, 2020 9:41 am If he won't listen to his parents how do you know he will read a book you buy him :)
Perhaps some Youtube videos.
I would definitely NOT buy him a book. Get him a library card instead. They're free, and you'll get to find out if he's curious enough to read.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Flyer24
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Re: Teaching teens about stock market, mutual funds etc

Post by Flyer24 »

It is going to be hard to get a teen to read a book or website about investing unless they are truly interested. I started my teens just learning about managing money first. They need to know about controlling spending and saving first so they can be ready when living on their own. They see it through how their parents live. I’ll teach them about the investment side when they are ready. No rush.
Elysium
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Re: Teaching teens about stock market, mutual funds etc

Post by Elysium »

I gave my teen a custodial brokerage account when he turned a teen, he wanted to buy AAPL shares and I suggested Total Market Index, we discussed some theory in short conversations that a teen can hold attention, talked about systemic vs unsystemic risk, etc. At the end of it he still wanted AAPL shares, so we agreed to split 50/50 AAPL/TSM. We bought both and left it.

It's been 4 years and AAPL has tripled, while Market has done what it has done. AAPL has been more volatile, Market less so. He doesn't ask or look at it, he just knows the money has grown. We do not trade or tinker, so we left the money alone, he will be go to college in a year and will have other interests. I don't know if/when he will ask for the managing the money, likely will at some point, but hopefully he will not be tempted to sell it and take it out, because in short conversations we talk about how leaving investment alone can make them grow more.

What I hope am doing is teaching by example, as in open an account he feels he owns, talk about basics of risk/reward, then select couple of different types of investments, buy & hold them, do not peek, do not tinker, then talk once or twice a year about progress in brief conversations, and after several years see the magic of compound interest. If you peek too much, talk too much, tinker too much, then you teach bad habits even if intention is good.

I don't think it has anything to do with me still, but he may be someone who just buys and leave investments there type, as it doesn't interest him enough to bother. Time will tell. Too hard to figure out future with teenagers, you have to try and hope something sticks, just don't try too hard.
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Re: Teaching teens about stock market, mutual funds etc

Post by willthrill81 »

Begin with the end in mind.

You need to first explain why it's important to have financial goals, some of which are short-term (e.g. saving for that new car that most teenagers want), and some of which are long-term (e.g. retirement). I think that the FIRE concept may be appealing to a lot of teenagers.

The stock market, mutual funds, etc. are just investment vehicles, and without understanding first how they can help to achieve the goal, instruction about them isn't likely to go far.
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Sandtrap
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Re: Teaching teens about stock market, mutual funds etc

Post by Sandtrap »

Investing is what you do with money after you earn it.
So. . . . concurently or first. . .
focus on what it takes to earn money, and lots of it dependably. . .
with higher education (so you can do what you want and have fun earning money)
focused career paths (doing what you want to do and enjoy making money)
etc.

It's very easy to understand doing what it takes to make a lot of money
and spending that on what we want and having fun

j :happy
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ROIGuy
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Re: Teaching teens about stock market, mutual funds etc

Post by ROIGuy »

A Random Walk Down Wall Street is a great book.
But I found to be really effective with people is a basic online be savings calculator. Start with even $1,000 at age 18 adding x amount every year at 7% return. Show show them what they'll have in 50 years, then show them the same numbers starting at age 30 how much less money they will have. Trust me, their eyes will be wide open. Once they get going on that show them an expense ratio calculator and what that will cost them over a lifetime and how much less they have to save monthly if they start earlier in life.
Independent George
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Re: Teaching teens about stock market, mutual funds etc

Post by Independent George »

rm wrote: Wed Feb 19, 2020 11:57 pm I have a teen and I want to give him financial education. What is the best way to start?

Obviously he will not listen to his parents but if there is any website/book you can recommend I would love to get your suggestions. Want to make him understand how stocks and bonds work and how mutual funds/ETFs work as well.

Also, I couldn't open a brokerage account in his name but what I have done is earmarked some money for him in my brokerage account so he will tell me what to buy/sell and when. I will then execute on his behalf. I wish there was a way to just give him an account separately and transfer some money there but I haven't had luck with my 3 main firms - fidelity, vanguard and wellsfargo.
I think the best way to start is with basic budgeting first, and explaining how interest and inflation works, and then compounding (especially as it relates to credit card debt). I'd leave investments until close to the end - the idea is to structure it in such a way that each lesson builds on the previous one. Start with a budget, then show how the surplus or deficit on that budget is affected by interest, then demonstrate the power of compounding on that interest. The first big eye-opener from would be the asymmetry of paying 20% credit card interest versus accruing 1.7% savings account interest. Only after that is truly mastered would I start on investing and mutual funds, as they both involve a lot more complex ideas (such as types of risk, volatility, and economic theory) while also applying the previous lessons on compounding.

Have you looked into opening a custodial Roth IRA? That is effectively a million-dollar gift for a teenager.
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Re: Teaching teens about stock market, mutual funds etc

Post by cheapedy »

Years ago on youtube I came across some great beginner financial videos from a user named thewaytobuildwealth
He is a young guy and explains everything from inflation to portfolios in a manner that is easy to understand for those inexperienced. He also talks extensively on Vanguard funds, so that's a plus.

https://www.youtube.com/user/thewaytobuildwealth/videos
medic
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Re: Teaching teens about stock market, mutual funds etc

Post by medic »

Does your son have some goal he needs money for - get a car, pay for prom, a new gaming console, etc. Does he have any money or income from birthday money, allowance, work?

If so, start with he basic of saving/spending. With our tween, we give him money weekly and when he wants things like new books, he has to pay with his funds. This gets him more interested in saving and figuring out the value of what he's buying. "I don't like this enough to buy it, so I'll just rent the movie/check out the book". "That seems like too much, let me check the price on Amazon first". We're trying the whole compound interest thing with a local savings account or talking about stocks/etfs, it's only momentarily interesting. When he was smaller it was easier when he'd hear me talk about owning Disney or similar and I could explain to him how a small part of what he spends to see a movie comes back to daddy as a dividend. Now he doesn't care since it's not his money and not immediate..
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Re: Teaching teens about stock market, mutual funds etc

Post by texasdiver »

Parent of three girls here ages 13, 16, and 21.

1. Forget the books idea. Unless you have a weirdly studious child. They won't look at them, ESPECIALLY a financial book.

2. The YouTube idea is not bad. There must be some young YouTubers with financial advice channels devoted towards the young. I expect there are similar people doing the same thing on instagram and other social media sites. Maybe give your kids an assignment to find the best youth-oriented financial advice bloggers on social media and see what THEY can find.

3. Get them started young with some sort of investment account at Vanguard or Fidelity. The details and specific funds are unimportant. What is important are two things. First, the branding. get them used and comfortable with Vanguard/Fidelity so they don't get sucked into the expensive options down the road. Second, the habit of saving. Putting aside a portion of your earnings should be something they start early on.

As for the details of stocks vs bonds, mutual funds vs ETFs, Roth vs traditional IRA vs taxable, etc. etc. You can fill in those details later bit by bit.
WarAdmiral
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Re: Teaching teens about stock market, mutual funds etc

Post by WarAdmiral »

I would recommend "Millionaire Next Door". Ordinary people who live ordinary lives but are millionaires.
https://www.amazon.com/Millionaire-Next ... 865&sr=8-1

From the book: "Marry someone who is more frugal than you" - one of the best pieces of advice out there.
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Re: Teaching teens about stock market, mutual funds etc

Post by tibbitts »

I would remember that you can teach the wrong lesson: kids will remember year after year of compounding losses. That was the case with me and it affected how I felt about investing for a long time. It might be that you need to be a little older before you're ready to get beaten over the head year after year.
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