by Erik Van Tongerloo

Created on: August 16, 2006   Last Updated: May 18, 2009

Teaching your children about making investments is important for their entire life and you can best start as soon as possible. The concept of money is really important and teaching them the basics will help them to manage their money. They will develop spending habits and once they understand the real meaning of investing they know they can't have everything they want immediately.

1. Teach where money comes from

You can maybe best start with teaching them where money comes from. There is a popular verb "money doesn't grow on trees" which explains best that efforts are necessary to earn money. Children need to understand that money is not always available if they want to buy something. You need to teach them that people have to work to earn money and that they only can spend what they earn.

It is really important you teach them that they don't spend every penny they earn. You need to explain how money really works. They will likely understand you can buy things with money but the concept of saving and investing is often a difficult issue. Try to explain if you save $10.00 in a savings account this will make more money. They receive interest for the money they deposit in their savings account. It is called investing; money makes more money and they need to save for various reasons in the future.

2. Teach your children to save and discover the benefits

Maybe you can start with a piggy bank. Let them save all the coins they receive or find in a piggybank. You can open a savings account for them and if they have saved a few dollars in their piggybank you can go to the bank with them and deposit this money in their savings account. Show them after one year that they have now more money in their savings account than the money they really saved with their piggybank.

3. Reading about investing

It is wise to buy some books of investing which are especially written for children. Maybe you can find also some suitable in the library but it is recommended these books explain easy the basics of investing. It has no sense to buy books about all kind of investment strategies, for example buying stocks or bonds, futures, options, mutual funds because children doesn't understand this difficult matter.

It is even difficult for many adults; maybe it is best you search for books where they explain with easy examples how they can invest and all the economic factors which influences our money. If you do a little bit research you can find books which explain easy with some

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