How about using a holiday gift to teach kids about money? Learning how money works and how to put money to work for them is a priceless gift. If you plan it right, it can be an engaging experience that can set them up for a life long journey. And let’s be honest, anything that’s engaging during long term social distancing is a plus for everyone involved.
If you’re on the Money Minx blog, you’re probably interested or have experience in investing. I’m going to assume this isn’t the first article you’ve read about finance or kids so I’m going to skip the basics (earnings, saving, spending, etc) and jump right into ideas for how to teach kids about money, Money Minx style.
So what’s the best way to teach kids about money – particularly investing and how money can make more money? Common advice is to buy stock in a “kid-friendly” company like Disney or Nike. Popular as it is, I don’t think that advice would track with my kids. I say it’s critical to find something that will pique their attention based on their interests. You’ve got to make it relevant to them. And get on their level. With that in mind, here are 3 ideas that I’ve got on my holiday list for my own kiddos. Full disclosure, we’ve already checked one of these items off the list and the other two are in the works.
Background Info on Our Kids and Their Ages:
When we talk about investing and making money work for us, we break it down in more detail for the oldest (12) and try our best to include the littles (3 and 5). I know at 3 and 5, the two little ones won’t understand it the same way an analytical, math-minded preteen will, but I think it’s helpful to expose them to the concepts. We do our best to normalize conversations about money with our family, from budgets to investing. That said, here goes.
It’s the holiday season so finding a meaningful way for kids to be thoughtful about giving is a must.
Teaching kids how a small amount of money can make a significant difference is a great way to do something charitable and teach a financial lesson at the same time. Consider choosing a non-profit micro-lending platform and set up a donation in your child’s name. Then let your child chose where to spend the money. One well-known example is Kiva. It’s a non-profit, online lending platform that allows people to lend money to low-income entrepreneurs and students in over 80 countries around the world.
A friend of mine gives her grandchildren $100 for Christmas each year and lets them choose the borrowers based on what they read about each person on the company website. The kids connect to the opportunities on a personal level and decide where they want to make their loan. When the loan is repaid, they can withdraw their money or choose to reinvest it. No, you don’t get repaid with interest. This is ROI in karma instead.
Note: Investors do not receive interest although borrowers do pay interest to Kiva’s Field Partners. The interest covers expenses associated with providing loans in developing markets. Also, Kiva loans are not considered a tax-deductible donation because there is a possibility that you will be repaid. As always, do your research. You can learn the details on the Kiva site.
Reasons Why Making a Business Loan is a Good Way to Teach Kids About Money
- The kids can get exposure to entrepreneurship, diversity, and how different communities rely on different services and businesses. Being able to see how others live (while being respectful, helpful, and not condescending) broadens their perspective and helps develop compassion. It also helps children to see opportunities, which is necessary if an entrepreneurial mindset is of value to you.
- Since the kids can choose to withdraw the money (or re-loan), this is a way they save their money to be used at a later date and put it to good use in the meantime. Some practice with delayed gratification here.
- Helping give someone else a boost toward financial independence teaches kids how money can work for people, how far it can go, and what a big difference can come from a small amount.
Micro-loan Options to Consider:
- Kiva – online lending platform connecting lenders to entrepreneurs in over 80 countries who are often financially unable to access credit
- Kutoa – Each month Kutoa partners with grassroots organizations in the developing world that have a history of doing good work, at a reasonable cost, with high returns. Three projects are listed on the site each month and then Kutoa opens the vote to the public. The project with the highest vote gets the donation. Anyone can make a donation, as little as $1.
- Zidisha – online microlending community that directly connects lenders and entrepreneurs (no banks or intermediaries).
- Slow Money – investment groups that raise funds for local and organic farmers. They have several locations in the United States. See if there is one in your community or maybe look for something similar.
Invest in Alternatives / Collectibles
The idea of collectibles is easy to grasp for kids. You buy something. Over time, it goes up in value (hopefully). You sell it for a higher price than you bought it. I personally think it’s easier for younger kids to understand this concept vs stock purchasing, even though buying kid-friendly stocks are a common approach in articles and blogs.
I spent a lot of time researching alternatives this summer. Funny enough, I stumbled across a few articles that described how LEGO collector sets make strategic investments. This got my attention because my kids are crazy about LEGO sets. Admittedly, the adults in my house are too.
Here is the scoop on what makes a LEGO set a good option for investing:
- LEGO outperform large stocks, bonds, gold, and other alternatives, with an average return of 11% in the time 1987 – 2015 (source).
- There is a major demand for LEGO. Sets can start way over $100 which means it’s not just kids that are buying them. LEGO movies, games, competitions, tv game shows, and amusement parks all demonstrate the popularity of these bricks.
- LEGO doesn’t overproduce sets. The company retires them eventually and some are special editions.
- LEGO investing is uncorrelated to the public market so it’s a great way to diversify.
The best thing about investing in LEGO sets is the kids were excited about it.
We spent a lot of time researching which sets we think will go up in value which gave us opportunities to discuss how to do research, how to evaluate opportunities, appreciation, supply vs. demand, and the idea of delayed gratification. Lots of space for learning there – and it was fun. I wrote in-depth about our experience with LEGO investing here so check it out if you want to read about stats and examples.
If you are interested in exploring ways to invest in collectibles like LEGO sets, here is the strategy we used with our own kids.
- Buy retail. Don’t buy on the secondary market. The sets there have likely already appreciated in value. Try to find a deal, promo code, or sale price.
- Purchase fully packaged sets that build something specific, preferably limited editions or have some other unique aspect.
- Go for big, complex builds with lots of pieces and detailed instructions.
- Choose niches, (movies, franchises, seasonal) and avoid generic building sets.
As with any other investment, do your background research.
- Make a list of which sets meet the above criteria and then look up each one on Brick Economy (LEGO economics, market values and trends guide) and Brick Picker (LEGO pricing and investing guide).
- Based on the information you find on those sites, decide whether or not a set has the potential to increase in value.
Rules of the Game
- Do not open the LEGO set!
- Keep your investment sets in a safe, dry spot. Do not stack the boxes (to prevent them from getting crushed of damaged).
- Secure sets from the temptations of bored kiddos and/or adults.
For LEGO sets, expect a holding period of 5 – 7 years. You can monitor the value of your investment(s) with a quick search on eBay to see what price people list the set for. Alternatively, you can use a tracking tool like the one found on Brick Economy.
Reasons Why Investing in Collectibles is a Good Way to Teach Kids About Money
- LEGO sets are fun. Kids and parents are fans so it can be a fun topic from start to finish.
- The research process can include apps, videos, niche-specific websites, fan forums, and cool ways to view the past performance of LEGO sets that have already gone up in value. Kids are digital natives so finding ways to leverage reproduce resources that “click” with them is useful.
Alternatives / Collectibles to Consider:
- LEGO sets
- Limited or special edition board games
- Limited edition toys or collectibles (think Barbie, comic books, trading cards, Star Wars franchise)
Fractional Investing with Online Crowdfunding Platforms
Crowdfunding investment platforms make it easy for virtually anyone to invest in assets that were once reserved for institutional investors or the wealthy. Now the world of real estate, small business, litigation finance and alternatives are available to us all, through fractional ownership.
I’m already a big fan of placing lots of small bets with crowdfunding platforms to test out investment potential. So when I came across Fig.co, a video game investment site, I immediately bookmarked it as a way to teach the gamer in our house about investing.
With Fig.co, fans can invest in video game campaigns to get exclusive rewards (traditional crowdfunding) or they can invest in the game to earn returns from sales (investment-minded crowdfunding). With rewards-based crowdfunding, a backer would select the preferred reward bundle attached to the campaign, pay the amount and when the game ships, the backer gets the reward. The exciting option though is to invest in the success of a game. In this case, a backer would evaluate investment opportunities listed on the Fig site, and when he/she finds one of interest, he/she can purchase Fig Game Shares for that particular game.
Once the campaign is funded, the developer goes ahead and creates the game – sharing milestones and updates to keep the backers in the loop of the game’s progress. Fun right? Once the game is launched and players download it, revenue starts flowing in.
Reasons Why Fractional Ownership is a Good Way to Teach Kids About Money
- Finding ways to connect investing with topics that kids already love (in our case, video games) is a unique way to get the child a video game gift that’s unexpected and unique.
- Building on interest is always a good way to get their attention.
- Investing on a platform like fig.co bring plenty of conversation topics to the table – investing in small businesses, helping a developer bring an idea to life, getting a glimpse of the development process from conception to launch and then to sales/marketing, how investing/ROI works, and the sheer fun of reading about different games and reasons the child things one might do better over another. So many valuable financial, creative, and technology topics to explore with this one.
- When I was a kid, Tetris and Mario Brothers were super exciting. I can’t even imagine how awesome it would be to have the chance to look through different video game concepts and help a developer bring one to life. And then get updates and play the game once it’s launched. Oh yeah, learning about investing at the same time would be totally cool too.
Fractional Investment Options to Consider:
- Fig.co – support independent developers and earn rewards or invest to earn returns from sales
- Rally Rd. – fractional shares in collectibles from classic cars to comic books
- Collectable.com – shares in iconic sports cards and memorabilia
- Mythicmarkets.com – self-described, “investing for geeks” with fractional shares in pop culture collectibles
Closing Thoughts on How to Teach Kids About Money this Holiday
Teaching kids about money and investing is a priceless gift. Why not make it fun and do it holiday-style? Giving an investment-minded gift is a way to open up valuable conversations with your kiddos, share an engaging experience together and enjoy something unique and fun.
Microlending, investing in alternatives and fractional ownership through crowdfunding platforms are three ways you can invest in something to teach your kids about money AND (most importantly) pique your kid’s interest in the investment process. All you need to do is find the way that will best engage your kid based on his or her personality. I hope the options listed here give you some good ideas to make your holidays extra special this year.
Wishing you a happy, healthy holiday season and prosperous New Year.