We teach children many habits from a young age, such as saving money. However, many people need more time to discuss topics like the stock market.
Times have changed; today’s children are technologically advanced and can learn about many subjects. Therefore, we should introduce them to the stock market in a way that resonates with them—perhaps as a form of a ‘mobile game.’
While the idea of investing at a young age may seem exaggerated, it can be a valuable gift that children give themselves.
Financial experts emphasize that starting to invest early provides ample time for growth, paving the way for quicker financial freedom.
What ties this whole process together is ‘time.’ When you invest small amounts regularly, they can grow into substantial sums due to the power of compound interest.
Investing with Rs. 1,000
Providing a certain amount each month for children’s expenses is customary. We should encourage them to divert some of this towards investments. This money can be invested directly in individual stocks, or they can initiate Systematic Investment Plans (SIPs) in equity-based mutual funds.
By investing for the long term, they can benefit significantly from the average gains that result from market fluctuations, and it will also enhance their understanding of the market.
Building Financial Discipline
Introducing children to investments at a young age will deepen their understanding of money and foster financial discipline. As their investments grow, they may consider investing more and be less inclined to make wasteful expenditures.
Taking Action
We should start educating children about financial matters when they are around 15 to 16 years old. Alongside helping them open a bank account, we should discuss financial topics such as the stock market and mutual funds. If you need to gain knowledge in these areas, consider consulting a financial advisor.
It’s essential to exercise caution regarding money, as equity-based investments carry a high risk of loss. Ensure that children understand this upfront and clarify that fast, easy riches are deceptive.
In today’s world, abundant information is available on any subject, making it challenging to discern what is true or false. Investing based on ‘tips’ from social media is not advisable, and this should be explained to them.
Encourage children to do their research. Have them choose a stock or mutual fund and thoroughly understand all related details before investing.
Encouraging Independence
Give children the freedom to choose their shares and funds, but ensure that final investment decisions are made after careful examination.
Many virtual platforms allow kids to simulate choosing stocks and investing like a game without requiring actual investment. These can be excellent training tools over the years.
Opening a Demat Account
You can open a demat account in the name of a minor, but several conditions are involved. Alternatively, you may invest for your children through your adult account.
Investment decisions should be made collaboratively with your children, but you must supervise their activities.
Once they reach adulthood, you can help open an account in their name and transfer their investment amount, buying the same number of shares and mutual fund units in their new account.
Being Cautious with New Investments
When starting with stock market investing, keep these points in mind:
- Don’t expect your investment to double overnight.
- Avoid Futures & Options (F&O) and day trading; instead, focus on investing in solid stocks.
- While profits can be exhilarating, it’s essential to remember that losses may occur when the market dips. Emotional control is vital.
- Conduct your research before trusting investment advice from friends or social media. Ultimately, you make the final investment decisions.
- Before directly investing in stocks, you can explore ETFs and mutual funds or apply for IPOs. Limit your initial investment to Rs. 25,000 at a time.