Think of Investing as spending money to buy something so that you can make more money (and that’s a WIN!). Stores need things to sell, and they have to get them from somewhere. This is an investment.
For example you may spend $20 on lemons to make lemonade. You can make 40 cups of lemonade that you sell for $1 each. You spend $20 to make $40. Not bad! But what happens if you don’t sell all the cups? You can lose money, too. Investments are things that we have to be really careful about.
Investing is much like saving because it is for the future. But, by investing money you can earn a lot more than you can than in a Savings account, and sometimes faster. When you invest you are buying “stock” in a company. Stock is a fancy word that describes “ownership” in a company. For example, if your favorite vacation spot is Disney World, you can invest in Disney World by buying Disney World stock. If Disney World makes money as a company, you make money as well. But if Disney World loses money, you can lose money.
You can also invest in your own company. Have you ever had a lemonade stand or know someone who has? You buy (invest in) lemons, sugar, and water and you sell a glass of lemonade for more money that you spent buying the lemons.
The reason to invest is for much larger purchases many years away. It can be for college, or for a car when you start driving. The more years you have, the more your money can grow.
Note to Parents: Sometimes to get started investing, it takes a onetime lump sum of money to open an account. If that is the direction you want and your child to go in, consider helping them with the initial investment.
Invest Action List:
- Decide what you want to invest in.
- Open an investment account. Your mom and dad will need to help out here.
- Add to your investment regularly.
The Mint has information online under the “Fun For Kids” at their website: http://www.themint.org/kids/what-is-the-stock-market.html.