How to teach kids about stocks

As parents, we know that it’s essential to teach our kids about investing, saving and building good financial habits. The world of investing can be fun and rewarding — but it comes with a lot of ground to cover.

A a recent Greenlight survey found that 86% of teens are interested in investing. And nearly half (45%) said they haven’t invested because they don’t feel confident or their parents don’t know how to get started. We’re here to change that. 

If you haven’t started to teach your kids about stocks, don’t worry. It’s never too late (or too early) to learn about investing. We’re here to show you how to make financial education fun and simple for your kids – and perhaps even for the whole family!

Start with the basics: Investment accounts

The easiest way to teach your child about stocks is by walking them through the investing process. Before you buy stocks, you need to open an investment account. Investment accounts let you buy and sell different types of investments and hold your assets. Some popular investment accounts include a Roth IRA (which lets you invest tax-free) or a traditional brokerage account, like Greenlight’s investing app.

Greenlight’s investing app enables kids and teens to research, explore and learn about the world of investing with expert analysis powered by Morningstar. With the money they have allocated to invest, they can propose trades for parents to make real investments with as little as $1. Greenlight’s app also has financial literacy for the whole family. And kids are set up for success with videos, research tools and fractional shares.

After you open an investment account, you can begin to build your investment portfolio. (An investment portfolio is just a fancy way to say your collection of stocks, bonds and other assets.) Add stocks, ETFs, mutual funds and more to your portfolio. Not sure how to pick them? We’ll get to that.

Plan for long-term investing

When teaching kids about investing, introduce the concept of long-term investing. The stock market for kids can be rewarding when planning for the long haul. If you invest early and often, you have the rest of your life to build wealth. If your plan is to invest long term, you’ll have less risk of losing money. 

Although it’s normal for the stock market to go down, overall it’s gone up over time. For example, did you know that the S&P 500 (an index of the top 500 publicly traded companies) had an average return of 10.5% from 1957 to 2021? That’s right. 10.5% is the type of profit you may be able to pocket when you teach your child to invest for the long term.

Remember, savings accounts are great for short-term goals and emergencies, but investing is best for long-term goals. For parents, retirement is typically top of mind when investing for the future. Though retirement is far down the road, it’s still a good idea to invest as early as possible. Remember: The earlier you invest, the more time you have to build wealth! 

The good news? You don’t need a lot of money to get started. A couple of dollars invested can go a long way when you plan for the long term. Beyond a stock app for kids, with Greenlight’s investing app, kids and parents can learn to invest together. So whether it’s for retirement or college tech, you have the whole family covered. 

Stocks, bonds and mutual funds

Stocks, bonds, ETFs, mutual funds. They’re all different types of investments. Mutual funds and ETFs track the performance of multiple stocks combined. Compare all your options when teaching kids about stocks, bonds and mutual funds.

Stocks and bonds are different. Think of stocks as pizza slices. If an entire pizza pie is a company, then each slice is a share — or a stock — of the company. As an investor, you can buy multiple shares (or slices) of the same company. The more dough you’re willing to spend, the more slices you can buy!

When you buy a share of a company, you are buying a small part of the company. This means you become a partial owner of the company while you own your shares. 

Ownership comes with its benefits, too! Did you know that some companies give their shareholders dividends? Dividends are profits from the company that are given to shareholders — typically every quarter. 

Stocks can have high risk and return, respectively. When a company does well, the stock goes up. If it does poorly, the stock may go down. Some stocks can be very volatile, while other stocks can be more stable. A smart investor knows not to panic. It’s normal for stock prices to fluctuate every day. 

Share prices can range from just a few dollars to a few thousand dollars. Mutual funds, on the other hand, gather power from multitudes of stocks bundled together, and if you have fewer funds to invest, an exchange-traded fund (ETF) is an excellent choice. ETFs can be purchased for a share price often less than $100, while mutual funds can have a $1000 minimum.

What about bonds? While bonds offer lower risk and lower returns, they are backed by solid government institutions or banks. Savings bonds can be great for investors that want a guaranteed interest rate in long-term financial security. So while your kids may be intrigued by the well-known stock company names they love, remind them about investment options beyond just stocks.

How to research and buy stocks

Kids and teens may gravitate toward big-name stocks from consumer products they love. Household names draw their attention — and for good reason. But are they a wise investment? Have them do the research. 

With Greenlight’s investing app, kids can learn about their favorite stocks and ETFs. And find more than 4,000 stocks and ETFs to research in the app. Once an investment account is set up, they’re ready to research the companies they know and love. This is a great first step before they add an investment to their portfolio.

Ready to invest? Let your kids research, learn and request to purchase stocks. Then, approve every trade right from your Greenlight parent app. They can learn about a range of financial literacy topics like stocks and compound interest. Then, encourage your family to invest regularly. And set up a calendar reminder to check the investments over a few weeks. Share your investment portfolio with them, too. Use your Greenlight parent app to show them the companies you invest in and how they’ve performed over a period of time. 

Open an investment account with Greenlight!

Want to get started? Greenlight’s investing app for kids is a great way to encourage independent financial know-how. Let your child be their own money manager. And no, you don’t need to be a millionaire to start investing. 

As parents, you can lead by example with the help of Greenlight's Investing for Parents By investing and learning together, your entire family will be on their way to financial success.

At Greenlight, we believe investing is for everyone. No matter where you are in your personal finance journey, we’ll give you the tools to own your financial future. While kids can research, learn and propose to purchase stocks, you are the executor of every trade, right from your app. Now, if you’re ready to get started, you can sign up here — with one month, on us!