Why you should teach your kids about the stock market

At the beginning of the pandemic I did a few webinars… the most popular was about investing. Which makes perfect sense! My inbox was blowing up with questions from clients about whether they should pull out their investments or stay the course. About if they should put their savings into the market while stock prices were at an all-time low. I had so many Moms telling me that they wished they learned more about this stuff when they were younger.

Now, I’m not about to give you investment advice over a blog post. I believe investing is a VERY important piece of your overall financial plan… but it’s just a piece! To give you advice with only one piece of the puzzle would be incredibly ignorant of me. But what I WILL tell you is that you need to know more about it.

WHY?

The investment industry is designed to tell us that it’s just too hard, too risky, and too stressful to figure it out on your own. When I ask women why they don’t invest, I hear things like…
“I don’t know where to start”
“I don’t know enough”
“I’m afraid to lose all my money”

I get why busy moms often would rather just stick their head in the sand and not learn about the stock market. It’s a HUGE topic often riddled with boring old white men talking in condescending finance jargon. And we busy moms have enough on our plates. We don’t have time to waste being discouraged by hours spent trying to figure it out online. But ignoring the stock market means we are losing out returns that could potentially make us hundreds of thousands of dollars over our lifetime. The BEST time to invest was actually yesterday. I mean that the longer you wait to learn this stuff, the more you will miss out on.

But Lindsay, what if I lose all my money?!

When people tell stories about the friend of a friend that they know who LOST ALL their family’s savings in the stock market, what they SHOULD be saying is “I know someone who didn’t do their research and made the mistake of putting all their money into one single company that ended up going bankrupt!”

The truth is that the stock market is made up of thousands of companies and has survived depressions, elections, crashes, natural disasters, wars, and yes… even pandemics. It’s not going to zero. If you tuck your money away into a high interest savings account, you’ll be LUCKY if you get a 2% return. The average return of the Canadian Stock Market, over it’s ENTIRE HISTORY (even through all those disasters) is almost 10% per year… over time, it always goes up.

Yes, it IS possible to hit a GOLD MINE with your investments. For example, one year after ZOOM went public, the COVID-19 pandemic hit and everyone had to learn to go digital. You bet your sweet bottom that stock skyrocketed from $62 to $166… all within 3 months. That’s a 168% return!

Duh. Don’t go in blind and throw your money around. The stock market is not gambling. You can make informed, smart decisions. Investing to make money for your future is WORTH the time to learn. IN FACT… women are often better investors because we do just that. We are careful. We look into our options. And if we want to DIY it rather than pay a fancy mutual fund manager an exorbitant amount of money to do it for us, we can. In fact, I wanted to prove that even my kids could DIY it.

So here’s what I did. During the pandemic I took the opportunity to teach my kids about investing.

I bought them a stock. I’m not gonna tell you which company, because I want you to go through the experience for yourself. My boys asked questions and grasped the understanding many adults lack! They got excited about choosing a company. They feel proud that they own a piece of it and they continue to ask all the time whether or not their investments are going up or down. It’s a learning experience that they won’t forget.

I want you to have this experience with your kids, too. So I wrote an e-book on the basics of investing and how to do your research before buying a stock. You can check out a preview of the book here!

To help your kids choose a stock, think about the following questions:

Is it a publicly traded company?
Are the products or services NEEDED or HIGHLY VALUED?
Has the company been around for at least 10 years?
Is the company unique? (or does it have BIG competitors)
Does the company operate in line with your values?
Is the equity consistently growing?
Is there positive working captial? (2:1 assets to liabilities)!
Are revenue and profits BOTH growing over time?
Is the operating cash flow HIGHER than net income?
Can the company pay off all their debt within 3 years with their cashflow?
Is the ROE higher than 10%, consistently over time?
Is the stock on SALE?
Do you have an advisor to help if you have questions?

If you’re not sure how to answer these questions, I’d love to help you figure out the process. Check out my e-book.

Published by theprettymoneyblog

To all you women that are working too damn hard to feel like you’re just getting by paycheque to paycheque… To all you ladies that just don’t have the freaking time for financial jargon and complicated budget systems… ​To all you women struggling to feel in control of your money, ’cause you know you can rock it if you just had a simple map… I see you. I GET you. I'm a busy mom of two boys and a wife to my business partner. I love baseball, red wine, and our family trip to Mexico every year. After more than a decade as a licensed professional in the personal finance industry, I’ve figured out strategies that are simple, but have massive impact on your wallet. I’ve left out the jargon and fine print because I know you don't have time for that. The Pretty Money Club enrolls new members twice a year for the 8 week course that will turn your ugly budget into top model pretty money... and most of our members stay in the club after class is done to keep learning and stay in touch with all the women they built community with.

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