One of the main laments of experienced sharemarket traders is that no one taught them the secrets of successful trading when they were young.
Often they had to find out the hard way – by a series of disastrous investments. I believe that one of the main roles as a parent is to inspire our children to find their own solutions to life’s questions – and how to become financially independent is a major life issue.
It’s never too young to start. From the age of two, there are sharemarket related activities that your child can enjoy.
This will prompt their natural curiosity about how you spend your time, and help them to understand the challenges that you are facing as a trader to a greater degree. Here is a guide to encourage your child to aspire to success in the sharemarket.
According to Piaget, a renowned psychologist in the area of intellectual development, children from the ages of two to four are capable of interacting on a basic, abstract level. (Another way of putting this is that kids can manipulate adults on purpose, and use them to attain their own goals).
They are egocentric, which means that they value their own needs above yours – as any parent can testify. Symbolic function develops where kids begin to understand that a symbol etc can represent something else. Imitation is a primary means of exploring the world.
At this age, you can encourage your child to colour in charts, and to set up an ‘office’ which resembles your workspace. Your child can pretend to ‘trade’ by drawing red and green candlestick charts, for example.
By doing this you are reinforcing your child’s importance, as well as buying yourself a bit of time to concentrate on trading.
Rules & Boundaries
From four to eleven, language becomes the primary mode of developmental focus. Rules and boundaries can be understood, and a sense of fair play and moral reasoning develops.
If you don’t have children of your own, borrow a neighbour’s kid or consider hiring an 8-year old child.
About $2 per hour and the bribe of a Tim Tam should suffice. After they have programmed your VCR and cleaned up the viruses on your computer, conduct a simple experiment – print out a chart and pin it up on your wall, take a few steps back, and have a good long look. Explain to the 8-year old that it is picture of how the share has been performing.
If your new mini-employee says that the share is plummeting – believe them! Children are much more objective than adults will ever be.
Find something that the child values highly, such as the latest ‘Nintendo’ game, and set a goal that you can both work towards to achieve it. Often people try to over-complicate their trading method. By simplifying it to the point that you can explain it to a child, your trading results will improve.
As expressed by Ross Campbell in ‘How to Really Love Your Child’, one of the main needs for children of all ages is sufficient eye contact.
By concentrating on your computer, without focussing your attention on your child from time to time, it is possible that they will resent your involvement with the sharemarket.
Sometimes it can seem that your children may be out to sabotage your analysis time, but try to see it from their point of view...trading is technically taking away your attention. Spending some time with your child and explaining what you are trying to achieve will result in many benefits.
Depending on the developmental level of your child, you may want to consider setting up an account in their name or at least encouraging them to paper trade. Until individuals turn 18, they are not legally allowed to trade in their own name, so you will need to set up the account where an adult acts as the signatory.
The key is to allow your adolescent a large degree of latitude. Teenagers can often be incredibly interested in anything with the potential to create an income, so use this motivation. Perhaps consider allowing them a 50% of all takings on a particular account once a year. Be creative.
Ask your child’s school whether share trading can be added as a special interest topic as a part of the maths or commerce syllabus. The Australian Stock Exchange runs a ‘School’s Sharemarket Competition’ each year via the internet – where both you and your children can compare your sharemarket performance against school children from all parts of Australia.
Taking part in this competition is free and you can get further information from the Stock Exchange’s website – www.asx.com.au. It is quite feasible for some children to have accumulated almost a decade of ‘trading experience’ by the time they hit their 21st birthday!
I have successfully encouraged my niece, from the age of 11, to become involved in the field of trading and finance by using many of these methods. She’s now 20, and has even written a book review on ‘The Teenager's Guide To Money’, for my website… for a small fee (which helped to provide incentive for her to read it).
Children learn by watching us. They will follow the example that we set. Here is one traders’ experience of the legacy left to him by his father. “My father bought me shares in a foreign company the day I was born. I sold them when I was in my late twenties. I must be one of the very few people who have been in the market every day of their lives. My father had the uncanny knack of selecting good shares. He would study the morning and afternoon newspapers each day. I wish I had spent more time observing my father and learning from my “master”, instead of activities like competition swimming, boy scouts etc.”.
These are just a few ideas about how you can get your kids involved in the sharemarket. Spend some time explaining why you are trading and what you are hoping to achieve. Help your children to develop ‘financial intelligence’ – it’s one of the best legacies that you can leave to them. Encourage their participation from an early age, and provide tasks appropriate for their level of development.
Louise Bedford has a free 5-part e-course waiting for you at www.tradinggame.com.au. She is also the author of The Secret of Writing Options, The Secret of Candlestick Charting, Charting Secrets and Trading Secrets.