If you’re raising an athlete, you’ve had plenty of opportunities to talk money–the cost of their gear, team fundraisers, and even the salaries of their favorite pros. But if you haven’t talked investing outside of this season’s draft picks, you may want to consider it. With investing becoming more accessible and more popular than ever, it’s a good idea to teach your teen the basics–especially before they get their first endorsement deal. (No pressure, kid).
Here are a few tips to help you get the ball rolling.
Tip #1: Start with the basics
Coach always says, “It’s all about the fundamentals.” In this case, that means helping your teen understand basic investing terminology and concepts. Break down the complicated stuff into language they understand. For instance, stocks: when a company wants to raise money, it can sell pieces of itself as shares of stock. If you buy a share, you’re a shareholder–and part owner of the company.
It’s important that your teen understands that investing involves risk. Just like in competition, there are no guarantees in the market, and sometimes the best offense is a good defense. Be sure to go beyond definitions and give examples of different types of investment options, conservative versus aggressive approaches, and why they shouldn’t panic if the market is acting weird.
Not sure where to start? Find financial lessons developed specifically for teens at Fidelity’s Youth Learning Center.
Tip #2: Stress the importance of a diverse lineup
Your teen understands that a strong roster has players with a variety of skill sets. It’s safer to have a deep bench rather than rely too much on one star player.
Show them that the same logic could apply to investing–diversifying by buying a mix of different investments can help guard against a major loss if one or two go down in value.
Encourage your teen to research their favorite companies, pay attention to trends, and explore industries that interest them. Not only is it smart to diversify with different types of investments–like stocks, bonds, and funds–but it’s also important to diversify the types of companies and industries as well as the size of the businesses they invest in. And while diversification does not ensure a profit or protect from loss, it can help balance risk and reward.
Tip #3: Get them off the sidelines
Studying the playbook is great, but you can’t beat on-field experience. If they seem ready for more independence, help your teen develop good financial habits with a Fidelity Youth Account. They can manage their spending with a free debit card, save, and even make their first investments in a secure app, all while you provide ongoing oversight.
You’re always looking for ways to give your kid a competitive edge (and sometimes that involves risk) but starting their financial education and journey early is something that could pay off for years to come.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917
Posted by VNN