Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

AS a parent it often feels that there are a million-and-one things to teach your kids. From “always say please and thank you” and “never take something that isn’t yours”. To how to tie up your laces and why you “must eat your greens”. The list goes on.

Spare a thought for your kids too because that’s all on top of what they have to learn in the classroom. If you’re the parent of a teenager anxiously awaiting next week’s GCSE or A Level exam results you’ll know all too well that there have been another million-and-one things they’ve had to learn there too.

Despite all this essential learning, there are still some very important things that have a tendency to slip through both the school and ‘parental guidance’ net.

How to start investing, is one.

Teaching kids how to save is a valuable first step when it comes to learning about money. But it shouldn’t stop there. As anyone with cash in the bank will know all too well, the low interest rate environment we’ve been stuck in for some time now is all well and good for borrowers, with rates at rock-bottom, but it makes for pitiful ‘rewards’ for savers.

The real power of money only really becomes evident when you start investing it. For kids that power is even greater, because they automatically possess a super-power that older folks don’t have when it comes to investing - the luxury of time. With decades ahead of them, the compounding effect can transform a small sum of money into a far, far greater one for kids, simply because it has all the time it needs. 

Watch how time can make a difference to your savings

Before we get started, let’s get one thing clear. I’m not suggesting you give Junior handfuls of money and free rein to buy and sell whatever they want. That would be daft. Not to mention against the rules, because legally you cannot buy shares or ‘take control’ of a Stocks and Shares ISA until you are 18. But, there is absolutely nothing stopping you getting them involved, showing them the ropes and teaching them the benefits of long-term investing as early as you can.

Steps to teaching children about investing:

Step 1: Encourage them to start small

A regular investment every month is the way to make it both manageable and impressive at the same time. You can save as little as £25 a month into a Fidelity Stocks and Shares Junior ISA, up to a total of £9,000 in the current tax year. That £25 a month adds up to £300 in a year, £600 after two years and £1,500 in just five years - and that’s before your investments have even got to work.

As the saying goes:  it’s "time in the market," rather than good "market timing" that pays off in the long run. In other words, keeping money invested for a long time is as important as the investments you choose.

Step 2: Teach them to think ahead

Good investing is a waiting game. Teach children to invest money they don’t need today or tomorrow that can be put to work for some time - 10, 20, 30 years or more down the line.

The small sums make it do-able and the power of time is the sprinkle of magic dust that turns those small sums into something far greater over the years.

It’s not too young to set them up with a Junior SIPP - a self-invested pension plan. You can save as little as £20 into a Fidelity Junior SIPP, which will be topped up by 25% by the government, boosting their savings even more. Showing them how their money is growing year-on-year will teach children the benefits of regular investing and could kick-start a positive savings habit. Just remember they cannot access their money until they reach age 55, rising to 57.

Step 3: Keep it simple

To begin with a tracker fund that simply tracks the FTSE 100 index of leading shares is a good way to get them started.

If you have a child or teenager with wanderlust or an interest in another culture or continent, then getting them invested in a fund that focuses on a specific country’s stocks is another simple way to spark their interest. Exchange-traded funds (ETFs) are typically low-cost, as they are passively managed, which means that they simply track the performance of specific markets or certain types of investments.

Step 4: Let them get their hands dirty

Investing is rewarding and can be quite addictive, in a good way, when you start to spot opportunities all around you. Get kids involved and take the mystery out of investing by encouraging them to spot trends or gaps in the market that they can make money from. This can be in individual stocks, but it can also be in funds.

If your teen is a FAANG fan (Facebook, Apple, Amazon, Netflix and Google) then rather than pick one to invest in, they could opt for a fund that currently invests in them.

The Rathbone Global Opportunities Fund, one of the five global funds on our Select 50, has large positions in Alphabet and Amazon, alongside other tech names such as PayPal, Microsoft and Nvidia, the gaming graphics specialist and a leader in artificial intelligence. The Jupiter Merian North American Equity Fund, one of the Select 50’s five North American fund options, currently holds Facebook, Amazon, Apple, Netflix and Alphabet (Google) – and Microsoft too.

Step 5: Teach them to trust their instincts

Often the most obvious ‘best’ investment ideas are right in front of you. Legendary investor Warren Buffett said: “Invest in what you know”.

Former fund manager Peter Lynch, a legendary Fidelity investor, did just that. With every stock he bought he knew the story of the company he was investing in.  He made sure he had a good understanding of what the company was doing right now, what it was going to do next, or what was going to happen, to increase the chances of making any investment in that stock come good.

Don’t be afraid to get your child involved and let their on-the-ground knowledge and view of the world around them help guide their investment choices.

So often the ‘art’ of good investing is simply being familiar enough with a company that you understand its business and the competitive environment it is in.

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment on ISAs and SIPPs depends on individual circumstances and all tax rules may change in the future. Withdrawals from a Junior ISA will not be possible until the child reaches age 18. Withdrawals from a Junior SIPP will not be possible until the child reaches age 55 (the government is proposing to increase this to 57 from 6 April 2028). Select 50 is not a personal recommendation to buy or sell a fund. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.

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