Explaining the ins and outs of investing to an apathetic teenager doesn’t sound like the most enjoyable way to spend a Sunday afternoon, but it is possible to make money fun and relevant for your children.

Nobody’s suggesting talking to your six year-old about interest rates and compounding, but this is considered an ideal age to introduce the concept of money. A lot of parents start giving pocket money to their children from age six – and if you link it to tasks around the house they can begin to understand that there is a connection between work and money.

‘Starting too early is likely to be unproductive but introducing pocket money at around six to eight years-old can be a good way of getting them thinking about money and realising that they can then decide for themselves whether to make a purchase or not. If they want extra money, paying them to do jobs can help them learn that money needs to be earned,’ says Charlie Musson, spokesperson for AJ Bell Youinvest.

For slightly older children you could consider an Osper card – a pre-paid debit card for kids aged between eight and 18 years-old. The card is linked to an app which lets children track their spending and saving each month. Parents get their own app which enables you to set an allowance, oversee spending, load emergency money and lock the card if it gets lost or stolen.

Most banks offer children’s savings accounts, which can be a useful way of teaching your kids about the benefits of saving as well as some basic principles around interest – although this concept is difficult in the extremely low-interest rate environment.

If you start early, by the time your children reach their teenage years they will already have seen how powerful saving up can be – especially if they’ve managed to buy the things they desperately want.

Making it relevant

Teenage years are also a good time to introduce the idea of investing. Given that it’s a pretty dry subject, it needs to be made relevant to their current interests.

Holly Mackay, founder and chief executive of Boring Money, says people tend to over-complicate the stock market, whereas it’s all down to supply and demand. She references Theo Walcott and a cupcake when she gives talks to children at schools.

‘Why does one earn £4 million a year, and one cost 50p? Supply and demand. Supply: there’s only one Theo Walcott but even I can make a cupcake. Demand: practically everyone on earth apart from me would rather have Walcott than a cupcake. Once we understand the impact of supply and demand, desire and perception and scarcity – well that’s basically it.

‘Another example is to get them to discuss whether they would buy Microsoft (MSFT:NDQ), which makes Xbox, or Sony (6758:T), which makes PlayStation, and what the impact on the share price would be if I invented an equivalent that I could sell for £5.

‘As with all of us, it’s about jumping beyond the dull graphs and making it real and relevant to the audience,’ Mackay explains.

Lee Goggin, co-founder of Findawealthmanager.com, uses a light-touch approach when he speaks to his own teenage sons about investment. If they are interested in a particular product, Goggin encourages them to look into the company behind it.

‘They both like Apple (AAPL:NDQ) because they use the devices all the time and it looks like Samsung (005930:KS), Apple’s main rival, has some issues with batteries in its latest  phones exploding.

‘About 18 months ago, they wanted to invest in Sony because it makes PlayStation. We looked under the bonnet, I explained the basics, we weighed up the pros and cons of investing and decided that it wasn’t a great share to own. It has gone down since then.

‘Even so, they are relatively free to choose what they invest in. The younger of the two wanted shares in Tesco (TSCO), for example. That looks like one we’ll be holding for a while. It’s all part of a learning curve though and, at 13, he’s got plenty of time on his side as an investor,’ says Goggin.

Looking ahead

If you’ve opened a stocks and shares Junior ISA on behalf of your child, it’s a good idea to explain what you’re investing in and why. You can also try to teach the concept of long-term investing – how you’re building a valuable fund for your children for when they turn 18 and head off to university.

‘There may be firms that they interact with on a daily basis that you could invest in on their behalf, such as Disney (DIS:NYSE), Facebook (FB:NDQ), Amazon (AMZN:NDQ) or Google (GOOGL:NDQ),’ says Musson.

‘If you don’t want your child to have access to the funds when they are 18 or you want to teach them about very long-term planning, you can open a Junior SIPP on their behalf and introduce them to investing that way,’ he adds.

In terms of investment principles, Andrew Craig, founder of Plain English Finance and author of How to own the world, suggests showing your children how they can own assets in every major region of the world. This starts to introduce the concept of diversification. Your children might find it pretty exciting to realise they’re investing in exotic countries like India and China – for example through a multi-asset fund.

You can also demonstrate how important and effective regular investing is. ‘It will be fun if every now and then they can take the money they’ve made and buy themselves a great present with the proceeds – but not with all of what they’ve saved,’ adds Craig. (EP)

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