Small enterprises are increasingly likely to be sold or folded with the owners’ offspring showing less interest in taking over the reins. It’s a dire situation compounded by many failing to have a retirement strategy.
Many investors chaff at the notion of sitting on “idle dough”; there’s a strong temptation to “do something”. But being liquid – and patient – proffers the opportunity to make the right investment decision at the right time.
Five ways to get your kids engaged with investing
One of the most powerful trends of 2020 was no doubt the huge surge in retail investors joining the stockmarket frenzy. With fresh stimulus cheques and stay-at-home orders in place, many turned to shares to pass their time.
In a world where financial literacy remains incredibly low, any engagement with investing should be seen as a positive, even if it may be uninformed and quite risky. The trend didn’t take off as strongly in Australia, perhaps due to our relative success during the pandemic, so engagement remains as important as ever.
As a financial adviser, I’m regularly meeting with retired clients, or those transitioning into retirement and one of the most common request centres around how to get their children involved with investing. It seems that for every retiree couple searching for the next dividend-payer, there are 2.4 children ignoring the markets altogether.
With this in mind, I’ve put together what, in my experience, are the five steps you should take to get your children engaged with investing.
Give them money. I’m sure that got your attention, as it will garner theirs. The best way to encourage young people to be engaged with money is to give them some. But you need to give it some thought; is it best gifted in the form of shares, units in a trust, or an ETF? It depends on your preference and theirs.
Invest in something they know. This leads me to the second tip, which is to find something relatable to your children. Do they enjoy gaming? Do they travel regularly? Are they worried about cyber security? Or climate change? In 2021 the investment options are endless with just about anyone able to access any investment they like. For instance, you can buy shares in Airbnb, an ETF investing into e-sports like Nintendo, or a renewable energy company.
Look outside Australia. No offence, but your children don’t want to invest into the same investments as you. They do not want to buy high-dividend-paying stocks, or the old-fashioned, reliable listed investment companies. The world is more global than ever, so don’t pass your home bias onto your children.
Find a user-friendly app. UX refers to ‘user experience,’ or how a customer interacts with your product. It is central to the way we all use our phones and other platforms on a daily basis. Unfortunately, despite significant investment, many of the traditional broking platforms offer little in the way of innovation; this was a major reason for the success of Robinhood. To engage your children, you need to find an app or platform that is both user-friendly and engaging for them.
Throw away the ratios. Your children don’t care about dividend yields, franking credits or price-earnings ratios, they are all about growth. This is evident in the way that markets are operating in 2020 and 2021; those who invest with optimism have been rewarded, while those who are concerned about losses have missed out.
