Most kids like to find presents stacked under the Christmas tree when they wake on Christmas morning.
While Christmas can be a very expensive time of year for most families, one priceless gift you can give your kids this year is the gift of investing.
Unfortunately, most children aren't given the appropriate levels of education regarding their finances, whether that be from their parents or school. It can create huge problems for them as they grow up, leaving many with financial hardships that may have been avoidable.
One great lesson you can give your kids this Christmas is introducing them to the share market.
That doesn't necessarily mean buying them shares or telling them to buy their own. While buying them shares in high-quality businesses [for example, Bapcor Ltd (ASX: BAP) or CSL Limited (ASX: CSL)] with the idea of holding for the long-term is one idea, it would also be beneficial to teach them things such as:
- What is a share? (a small unit of ownership of a company as a whole, allowing the owner a small distribution of profits in the form of a dividend – if one is declared)
- What is the share market? (a place where shares are bought and sold)
- What are the benefits of investing in the share market?
The answer to the last question is one of particular importance. Historically, the share market has produced far greater returns than most other asset classes. Although it is risky, by nature, buying high-quality businesses for the long term (allowing compounding to work its magic) can be a great way to build wealth.
Indeed, Warren Buffett – one of the most successful investors in history – bought his first stock when he was just 11-years old. Your kids don't need to be that young when they buy their first shares, but the earlier they start learning the more they stand to benefit in the long run.
