What is the stock market?
At the most basic level, the stock market is a place where people meet to buy and sell shares (also known as a partial ownership or a "stock') of a company for a specific price. The price you pay for your shares vary over time based on supply and demand for the underlying company, and this allows for people to both win ("profits") and lose ("losses") on their investments.
Let’s take a quick example:
On the 1st of January, you buy 10 shares of $AAPL for $100 per share. Your total investment would be $1,000. Now, say exactly one year later $AAPL is trading at $150. Your investment is now worth $1,500 (10 x $150). If you sell your investment, you net a total profit of $500. Simple, right?
Well, yes. But how would you know to buy at $100 and sell at $150?
Unfortunately, there is no perfect answer. There are many ways to make money in the stock market. Some people invest based off the industry the company is in, the products they produce or whether they pay dividends, for example. Others try to estimate the company value based off future money the company will earn. While some look at stock charts and base their decisions off that, where they may use a multitude of technical indicators to buy and sell.
Teaching your children about investing
Now, using the knowledge you now have, how do you teach your children about the stock market?
You do it together
The best way for a child to learn is through doing. No matter how good an explanation, simply explaining how investing works is not enough. Children must feel involved and the one way to do this is through a custodial account.
With a custodial account, both you and your child can learn through investing together.
One of the best examples:
A child gets their first phone and you ask why they chose that phone in particular. They respond with the usual “all my friends have it”. You ask why again and dig a little deeper and then a conversation about that company is ignited. This allows for the opportunity to discuss investing. With a custodial account, you can then invest just a small amount in that company, so the child is now engaged to learn more. They see how a new product launch or a CEO stepping down can impact their investment and as time goes on, their experience grows exponentially.
Buying stocks for kids
(How to open a stock account for children)
Many of the typical brokers that offer normal investing accounts do not offer custodial accounts. That is why we at Loved wanted to change that and make the investing experience as easy as possible.
With a Loved custodial account, you can forego your coffee for a day and use that money to better your child’s future. With our easy-to-use platform, you can buy stock for kids and monitor how their investments are doing. As well as this, we want to make educating your child easy and that is why we offer educational content your child can read and watch.
Open an account today and pave the path for your child’s financial future