Over the past several years, I have been interested in asking great fund managers how they teach their kids to invest.
It’s something I believe has been sorely lacking in traditional education. I for one would have been much better off if the principles of investing were taught to me in school (not to mention managing credit cards, debt and savings!)
The answers from these experts have been varied.
Some have bought their children shares in their early teens. Others have started an earnings system from housework, where their children are encouraged to save a percentage to invest. Some have bought them a managed fund at birth.
The one thing, however, that they have all had in common is the fact that they got their children started early.
Most agreed that primary school years were good for teaching the value of money, and savings. In a world of instant gratification, getting kids to understand early that they cannot, and should not have everything they want is a challenge in itself. The ability of not comparing what they have to what others kids have is also right up there.
High school seems to be the time most professional investors start exposing their children to investment lessons. One lesson that I loved was from Kerr Neilson from Platinum. He believed that asking your children to be interested in a company, and to understand that company, was incredibly important to spark their passion in investing.
Whether it be tech stocks, medical or media, he believes that if young people have a passion or interest in a sector or an individual organisation, they should own some shares in it (it does not have to be worth much at all), and track the share price versus what’s happening at the organisation. This, he believes, will help to ingrain a life-long interest in investing.
And we all know that the magic of compounding means that the earlier you start, the better off you can be.
While schools seem to have come some way in teaching kids about finance and financial planning, there is still a long way to go.
Companies like netwealth are doing their part by sponsoring youth-created organisations like Banqer, which teaches kids how to invest and grow wealth in the classroom, which is great to see the industry getting involved in.
One thing is for certain. No longer is it enough to teach our kids through traditional education and life skills. In a world where property may be out of reach of most, unless they have wealth creation skills, it’s going to be tough.