Thursday, March 17, 2016

How To Add The Investing Arrow To Your Kid's Financial Quiver

Today’s fantastic family finance article is:

Investing Arrow

It’s not unusual for parents to teach kids money basics like saving, budgeting, and even charitable giving. But today’s article reminds us that investing rarely makes the cut. Why?

“It’s for the rich.”

“It’s too complicated.”

“It’s too risky.”

It doesn’t have to be any of those things.

Investing can be cheap. You can start investing with as little as $25 at many brokerages. In fact, a recent startup has no minimum balances and no trading fees. It’s called Robinhood. As you can tell by the name, no need to be rich to benefit.

Investing can be simple. Don’t pick any stocks in particular, pick them all. Choose a low cost index fund that captures a little piece of every stock in the market. No need to overthink it.

Investing can be low risk. With an index fund that spreads your investment across the whole market, you’ll lower the risk of picking a loser. Keep buying more at regular intervals, and you’ll lower the risk of buying at the top. Stay invested for decades, and you’ll lower the risk of selling at the bottom. Combine the three to earn solid returns with minimal risk.

To recap: purchase a low cost, diversified index fund at regular intervals over a long timeframe. Cheap. Simple. Low risk.

Pretty basic.

That’s all you need to know to add investing to your kid’s financial quiver.

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