Every year birthdays come around and parents must decide on what to get their kids for their birthday. Do you get them the expected toy or do you give them something you think they can use? Or, if you are out of ideas and time, do you give money tucked inside a funny card and tell them they can buy whatever they want?
Regardless of what you decide, giving kids money for their birthday is a great idea. Depending on the age, they may or may not agree. A younger child may not understand, but an older kid will come to appreciate that they have money to buy what they want. When giving birthday money, give your child the option to invest. You can starting set them up for success early on.
Why is investing birthday money such a good idea? The answer is…. Time.
If your kid is young and gets money for birthdays and you invest it, they will have several years to draw interest on it. The investment can be high interest savings accounts, stocks, or real estate. The options are endless. This means they can watch money grow year after year along with adding money to the investment over time.
While this may not be as fun as a playing with a toy, as your kid ages and sees the money increase, they will begin to understand the value of saving money and investing it. So not only is the investment growing, but they are also learning a valuable lesson.
Time is the key factor here. While we typically don’t like to sit around and watch time pass by, in this instance, time is your friend. Your child is learning valuable lessons about time, money, and growth strategies from a simple birthday investment and the payout at the end is far better than anything else they would have purchased.
As a parent, talk with your kids about investing and give them an option to invest. Have a portion of the birthday money go towards whatever they maybe interested in. For example, if they love video games, have them buy stock in a gaming company. If they love real estate, have them set up an account with interest to work towards their goal of buying a rental property.
As a teacher, have a local banker come in and explain to the kids how investments work and if the investment options to offer.
When it comes to our kids, we want to set them up to be successful and financially free. Here is a way to get started on the right path!