Is the stock market for kids? That’s a question that many day traders who trade penny stocks and who just happens to have kids may sometimes ask themselves. For some the stock market for kids idea is a bad one; but that’s only if the point of view assumes that your kids will never move into the grown-up world of adult finance. Chances are they will, so it is a good idea to educate them and have them believe in stock market for kids.
Imagine for a second that you have a kid and have the parental ambition to steer them towards a career in banking. In order get them to buy into the idea one of the things you’ll have to do is teach them the fundamentals about money. They’ll have to learn about the origins, the institutions, the pitfalls, the Medicis, and all other the other historically relevant details about money. Such an education will help develop an affinity for money and how it works, eventually, if they are diligent and your plans turn out right, they’ll become bankers.
The same banking principle applies to stocks and the stock market. In order to educate your kids and make stock market for kids relevant, you need to teach them about the basics. Many penny stocks day traders are unsure where to start; this needn’t be the case. The simple approach is best; like painting by numbers, the more you concentrate on teaching your children first principles the better.
Stock Market for Kids – First Principles
No stock market for kids education can begin sensibly anywhere but at the beginning. So, the first things you should be helping your kids wrap their heads around is the stock definition of a stock. No understanding of stocks and you might as well be teaching them Mandarin where any stock market tips are concerned. By now you should already know that a stock is a percentage ownership in a company. That share is where the term “shares” comes from, and it can range anywhere from 1% to 100%. Generally though, shares of a company’s stock is usually owned across the board by a mix of individuals (think your individual investor and day trader) and institutions (think mutual funds, hedge funds and pension funds). This ownership involves daily exchanges of shares and that is typically reflected in the movement of a company’s stock price on the stock market.
Stock Market For Kids – Core Purpose
Once you get your kids to grasp the importance of understanding stock market for kids, the next big step is to help them develop a core purpose and philosophy for trading or investing in the stock market. Here the advice is to get your kids to understand the fundamentals of buying low and selling high. The lesson to your kids would be no different than the lesson in making a profit from a lemonade stand. If $200 is spent to acquire lemons and a stand, then any sales from the finished product should be more than the initial cost of the product. If sales come in at $190 then the kid is down $10 – they’ve lost money. No kid who wants to be a champ at stock market for kids can move comfortably into the real world of day trading or investing without grasping this fundamental principle.
Stock market for kids entails lots more than just first principles. The obvious extensions of learning will unfold over a lifetime; that seems to be the sentiments expressed by people like Warren Buffett. According to the sage of Omaha, reading is fundamental.