As the holidays draw closer, are you scrambling to find a gift for your kids that will have special meaning and might even some long-lasting value and a lot of fun? Look no further. In this 4th blog post, you’ll discover a terrific holiday gift that can last all year long and can also be a powerful and enlightening learning experience that won’t even feel like learning! On top of that, this is one great gift you don’t even need to wrap!
Today we’re taking a page from the FUTURES: Financially Literate Kids for a Financially Literate Society™ program’s Investing strand to teach your kids about stocks and investments—first hand. This year, why not invest in a gift your whole family or class can experience? Buy a few different shares of stocks and then make joint decisions about your investment as the year progresses.
These topics might sound out of reach for younger—or even older—students, but after learning some key terms and the main decisions involved in investing, they’ll be thinking like future stock brokers in no time. If you’re not familiar with investing and the stock market, this post and the amazing tools in the FUTURES program, will give you a quick overview or refresher. Remember, you always have the entire FUTURES program at your fingertips—and it’s all FREE.
What’s It Called?
First, let’s review a few key terms:
What is a stock?
A stock represents ownership in a company. A person who owns a share—called a shareholder—is allowed to vote on decisions made by the company.
What is a share?
Think about a pizza. The pizza represents a company. Each piece is a share of the company. Each piece of the pizza is an equal share.
What is a dividend?
A dividend is a sum of money paid periodically by a company to its shareholders out of its profits. A dividend is paid out periodically.
To Sell or Not to Sell?
To sell or not to sell: this is the big question when it comes to investing. When a stock value goes up after the shareholders have purchased it, shareholders can choose to sell their stock and receive the money they earned. However, when stock is sold, shareholders are no longer part owners of the company and can’t earn any future dividends.
To Risk or Not to Risk?
Stocks are considered to be a risky investment. Unlike a bank that guarantees a particular rate of interest and can ensure that you won’t lose the money you deposit, while stocks can increase in value after shareholders purchase shares, they can just as easily dramatically drop in value, too. Even if an investor researches a company and feels confident about a decision to invest and buy shares in that business, the company might still do poorly and the investor can potentially lose money.
This easy-to-follow downloadable flowchart will guide you and your kids in making decisions about their STOCKing GIFT when the price of their share is up or down. Download it here.
The Holiday Gifting Process
Some families make the decision to do stock selection ahead of time in order to make their stock purchase before the holidays so they can present the stock as an official gift. Others opt to make the “stock shopping” experience part of the gift. Many a family meeting and small-group class discussion have taken place on this topic. Either way, you and your kids will have lots of chances to make your own investment decisions together!
If you decide to engage your kids in the selection process, include even your youngest investors. When you’re working with younger kids, help them to gather financial news stories about a few publicly traded companies with available stock. Older kids can typically research news stories on their own. Tech-minded kids might decide to research Apple, while kids into sports or fashion might dive deep into news about Nike. Encourage kids to think about products they use every day. Clothing companies, foods they enjoy, and social media companies also are good directions for kids to explore.
This quick process works well if you want to involve your kids in the stock selection process.
Invite kids to make a list of three different company suggestions.
Coach them to choose based on products that they think are successful, profitable, and have a chance of lasting long into the future.
After all contributors have had the chance to share their ideas and tell why they believe in their company choices, identify similarities across the ideas.
Ask your little group to narrow down the choices to two companies.
Choose Two!
Once you and your kids settle on two top companies, share that your little investing team has a fixed amount of money to invest. Consider choosing a dollar amount that is easy for kids to compute. Depending upon the two final choices, a fixed dollar amount of $200 might allow you to purchase more stocks in one company than the other. You could take a vote or opt to divide your investment amount across both finalist companies, buying fewer shares in each company.
Once your team has made its stock purchase, have them consider the latest news about the company or suggest two or three possible scenarios, based on the current status of the company.
If the company they’ve chosen happens not to be in the news at the moment, ask these “What IF” questions to propose some hypothetical scenarios that could prompt their buy, sell, and hold decisions:
What if the company loses a big deal?
What if the company is coming out with a new product?
What if the company just gave a lot of money to a worthy cause?
What do these events tell you about the company?
Will you continue to invest, sell your shares, or buy even more shares in the company?
It’s Decision Time
As the year begins, meet periodically about the investment over a weekend breakfast or a morning meeting in class each month.
As a group, you can sort through available information and think about questions that need to be answered and how you’ll find those answers.
Together you can analyze the factors that are likely to affect the prices of the stocks and then decide to buy, sell, or hold.
Prompt them to review the flow chart above.
Finally, it’s decision time! Should your team decide to buy, sell or hold their stocks in Company X?
Kids should be able to explain clearly why they think your team should make its decision.
Coach kids to back it up their views with information from the news and your scenarios.
Investing—in Everyone’s Bigger Future
From stocks and bonds to low- and high-risk investments to mutual funds, the nuances of investing can be intricate; this is why the FUTURES Investing strand is so important. In these stand-alone sections and lessons, your kids will define investing and learn why investing is a beneficial practice. Beginning to understand the process of choosing a stock includes reading financial information, researching simple information, and comparing the stock to its peers. With the help of FUTURES easy-to-do worksheets and hands-on learning strategies, kids and adults can wrap their heads around even complicated investing details.
Investing in one's future is a key part of life and starts long before adulthood and entering the workforce. This is why it's so important to help kids understand that Financial Literacy is a powerful tool, designed to help them begin to plan and invest in the bigger future they want for themselves. Even just one share of stock as a holiday gift can get your team of young investors off to a real-world start!
What Kind of Future are You Investing In?
Hands- and minds-on activities like this that allow kids to imagine what they might like to do in the future is a key developmental strategy. It provides the foundation for focused goal-setting. The whole FUTURES program gives kids a solid framework within which to understand the complex world of investing. Providing different exercises and opportunities for your kids to put themselves in that “future” world NOW helps jumpstart kids to develop their own investment philosophies, a key stepping stone to full financial literacy.
With the help of the Investing Strand and FUTURES, you and your kids will not only be able to understand the complicated world of stocks, your kids will also begin to understand how to start investing in their own bigger FUTURES.
How’s this for a STOCKing Stuffer gift idea that keeps on giving? So, this holiday season, why not consider adding a simple stock gift to your shopping list. You’ll all discover many valuable dividends as a result of even a very small investment and even create a few long-lasting memories with your young investors!
Check back for our next FUTURES blog post 5 entitled T’is the Season for Social Responsibility for 3 powerful Ps that can spark lots of fun conversations over this holiday season.