Stockspot CEO Chris Brycki had a novel way of getting his five-year-old interested in investing. He told his son that each time he watches Disney, his global Exchange Traded Fund (ETF), which holds Walt Disney Co shares, benefits a little.

Brycki’s son took his dad’s advice to heart. “He started telling all his friends at the playground that they, too, should watch more Disney cartoons and movies, so his ETF might earn more money for him to spend!” Brycki laughs. 

For Brycki, the Disney comment was about helping his son relate investing to things he knows. “When I was 10, my dad used to tell me when we went grocery shopping that I owned a tiny piece of this supermarket through my shares in that retailer. It got me thinking about share investing through companies I knew.”

Morningstar’s Shamir Popat teaches his kids about the power of compound returns and investing over long periods. Nabtrade’s Gemma Dale suggests making investing a shared interest between kids and their parents or grandparents. Shaw and Partners’ Felicity Thomas says parents need to have regular money conversations with their older children.

Every family, of course, is different. When it comes to developing an interest in investing, what works for one family or child might not work for another. Some parents might not be in a financial position to help their kids invest. Others might prefer to let their kids have a childhood free from money distractions.

Many parents and children, however, face a common investment challenge. Rising house prices and living costs means people may need to consider starting their investment journey earlier in life. 

“It’s never too early to start investing and building wealth,’ says Brycki. ‘If one waits until they are well into their twenties or thirties to begin investing, it could be too late if they want to build wealth to buy a house.”
 

Understand the risks

There’s a serious side to encouraging kids (under 18) to invest. An account with an investment firm will need to be opened if kids want to invest in shares, ETFs or other listed securities. If those securities must be held on behalf of, or in trust, for someone else, a certain type of minor account could need to be opened. Commsec and other broking firms provide information on minor trust accounts.

Moreover, there could be tax considerations when holding assets on behalf of someone else or fees if those assets are transferred to a child when they turn 18. Therefore, it’s a good idea to seek professional advice or do further research of your own before setting up an investment account for your kids. 

Also, it’s worthwhile considering any potential impact on children if the value of their money falls. All investments have risk. It’s possible that a child who diligently invests part of their pocket money, or wages from a part-time job, could see a drop on their investment during a period of high sharemarket volatility so making sure kids understand the possibility of negative returns as well as positive ones is key. That’s why it is important to think about diversification, risk tolerance and the benefits of long-term investment strategies before encouraging kids to invest.

“At nabtrade, we regularly look at the fees involved with different investment products,” she says “According to our analysis, investing less than $1,000 to begin with, or topping that up in  amounts below $500, doesn’t stack up in terms of fees.”

Dale says ETFs have made it easier for parents to help their kids start investing. “ETFs typically have lower fees than other types of funds and some ETFs provide exposure to hundreds of stocks and thus diversification. ETFs offer an alternative to picking specific stocks, which might be an obstacle for people who don’t know where to start or worry about the potential of something going wrong with a single stock.”

Risks aside, here are five strategies to get kids interested in investing:

1. Education 

Brycki says it’s important that parents educate themselves first about investing before encouraging their kids to do the same. “The reality is, not all parents are competent to teach their kids investment lessons because they might not have much experience themselves in investing. It’s not hard to learn the basics and there’s a lot of quality, free investment education available.”

Brycki’s firm, Stockspot, an online investment adviser and wealth platform, surveyed approximately 4,500 of its clients who hold accounts on behalf of their children. “Parents told us they want more investment education to help them become better investors, so they can pass on that knowledge to their children.  They see the value in making investing a life skill that kids learn.”
 

2. Make investing visible 

"My kids are starting to learn about the power of compound returns and the benefits of sacrificing a little now, to save for the future. They see how much their money has grown since they started, and as a result, are developing a real interest in investing.”

Popat says he first learned about investing as a 16-year-old. “I was fortunate to learn about the benefits of investing as a teenager, but even that is too late these days. We live in a different world today where kids need to become financially literate and start building wealth much earlier in life compared to previous generations, given the high cost of housing in capital cities.”

3. Involve the grandparents

Gemma Dale suggests linking kids’ investment strategies to money for birthdays and Christmas presents – and making it a fun activity.

“I love the thought of grandparents helping their grandkids get started in investing,” she says. “For example, instead of giving the grandkids birthday or Christmas money to buy toys, they might arrange for part of the money to go into their grandchild’s investment account. I suspect some grandparents feel uncomfortable about giving their grandkids money each year to spend on things and would much prefer to see them save part of it.”

Dale says grandparents could consider investing as a shared activity with their grandkids. “Together, they can watch the money potentially grow over time and talk about investing with their grandkids. Helping the grandkids get started in investing through a small amount of ‘seed capital’, and to learn about investing, is a great gift from grandparents, where possible.”
 

4. Encouraging young adults to invest

Thomas says parents chould have ‘financial check-ins’ with their older children. “Have regular conversations about their investments and financial goals, offer guidance and support as needed, but also give kids space to make their own decisions. By making investing relevant, accessible, and engaging, you can help young adults see it as a potential tool for building wealth and achieving their financial goals.”

Thomas suggests bringing kids to their parents’ meeting with their financial adviser, if they have one. “Be open about money through ‘family style’ board meetings,” she says.

5. Learn by doing

Like most endeavours, the best way for kids to learn about investing is to do it. Thomas says parents can encourage kids to invest a small amount of money in shares, funds or ETFs. “Let them experience the ups and downs of the market and gain hands-on experience.”

ASX offers a range of free, online education resources to help in this regard. The ASX Sharemarket Game, for example, is a great way to learn about investing in a safe environment that provides participants with play money.

“Gamifying investing is a good way to make it fun for young people,” says nabtrade’s Gemma Dale. “Through the ASX Sharemarket Game, participants can build watchlists and see the value of their hypothetical portfolio change daily. The Game is a way to learn about risk and reward and is something families can do together.”

ASX Investor Day, the ASX’s premier event for retail investors, is another way to get young adults interested in investing. Ian Irvine, the event’s long-time Master of Ceremonies, has noticed more people bringing their older children to ASX Investor Day each year. “There’s a definite trend of mum and/or dad attending the event with their kids to watch the presentations and to talk to investment experts.”

ASX offers free online courses on Shares, ETFs and Bonds to help beginner investors – or their children - start their investing journey.