As early as possible, you can teach kids about the stock market. However, we won’t advise using technical terms you’ll find in online blogs and news websites. Plus, children understand concepts better through play than a lecture. This post will talk to you in-depth about explaining stock markets for kids, we’ll give you some ideas for enriching activities that drive home each point completely.
You own a stock, you own a small share of a company. Getting into a bond binds you into financing a company for a fixed period. All of these are securities that hold great value for investors. Explaining these to kids with terms and objects they’re familiar with makes it easier to understand the stock market.
By going through everything here, you’ll have no problems getting your kids to understand everything about Singapore’s stock market.
The Stock Market: It’s a Marketplace That Sells Different Things
Take your children to the local marketplace. Introduce them to a few shopkeepers, and allow them to explain their daily activities (they’ll likely love doing it for kids). Introduce the idea that a marketplace sells many different things and that a stock market is just the same.
A refresher for adults: A stock market works the same way as traditional goods markets. Legal tender, such as the Singaporean dollar, can purchase goods from both goods and stock markets.
•Buy and Sell Stuff, With a Few Risks
It’s correct for your children to think that both goods and stock markets have the same buying and selling concept. However, it’s critical to tell them that goods markets have fixed, regulated prices. Differentiate the stock market by explaining the products have no fixed values. Instead, they’re allowed to change their prices on a daily and hourly basis.
Explain that children can get more or less chocolate on a daily, hourly, and monthly basis when they buy chocolates from this particular market instead of the goods market
A refresher for adults: The retail goods market has fixed and government-regulated prices because they are necessities. The stock market allows regulated price value changes to accommodate the real-time changes in supply and demand.
Demonstrate the difference between goods markets and stock markets. Have you or another child play a shopkeeper and another a buyer. Allow them to buy one chocolate from the shopkeeper.
Next, demonstrate the stock market’s dynamic prices. Pose as the shopkeeper, and allow your kids to buy chocolates from you at one dollar during a fixed period. Then, tell your kids to buy from you again after one minute, then increase or decrease the chocolate price.
Stock: Chocolate With Dynamic Values
Tell your children that stocks are similar to retail market chocolates but can change their prices or chocolate content at regular periods. You can use the analogy that retail market chocolate is plain chocolate. Alternatively, stock market chocolate can grow bigger or smaller at any time.
•Saving and Investing
Your children are likely fascinated by the idea of self-growing chocolate. Entertain their astonishment by telling them the self-growing chocolate does not need water or nourishment. Instead, they just need to understand the public’s perception of the chocolate they’re holding.
Explain that if more people buy the same chocolate bar, everyone’s chocolate will increase in size and shape simultaneously. However, if the chocolate runs out, the content or prices will become unstable and inconsistent. While everyone eats theirs, Saving chocolates increases its content or price too — and your kids can sell them when everyone’s chocolate runs out.
However, everyone will become sad if chocolate does run out, even if it is beneficial to your kids to increase when they save it. Therefore, highlight to children that they can give their chocolate bars to chocolate makers to grow more bars, illustrating the concept of investment.
A refresher for adults: Saving stocks retains its immediate value. As the stock’s supply decreases and demand increases, they gain value too. Alternatively, if the stock is in short supply, it’s a one-time, big-profit product for sellers, which they can’t repeat again. Stabilizing prices involve the equilibrium of buying and selling a particular stock.
Take two jars. Write the benefits of both savings and investment jars in one sentence.
Savings: Chocolate you can eat at any time
Investment: Chocolate that your kids can give to chocolate makers to make more chocolate.
The Stock Exchange: A Regulated Chocolate Marketplace
Explain to your children that the government regulates both retail goods and stock market prices. However, this particular chocolate market has a special regulation that allows prices to change every minute, hour, and day. Name this particular market as the stock exchange.
•Stock Exchange Responsibilities
Explain to your children that the stock exchange is a particular chocolate marketplace that makes it easy to buy and sell chocolate in different sizes or prices. One significant difference between retail and stock exchange chocolates is you can only buy the latter in bulk.
Tell your children the stock exchange makes sure all chocolate your kids’ purchase has the right prices or amounts, and everything is in paper before they proceed to pay and accept the seller’s chocolates.
•Supply and Demand
Earlier, we mentioned to your children that savings can increase in value if supply decreases. Additionally, the chocolate maker’s failure to make more stock will increase their savings value. However, doing so will create instability, an undesirable outcome for any investment venture.
This example demonstrates the law of supply and demand. Chocolate companies must make sure it has enough supply and demand to stabilize the prices. Additionally, explain to your kids that the government urges the chocolate companies to produce enough to meet the demand without devaluing the supply.
A refresher for adults: Stock market prices change due to evolving supply and demand hourly. The economic law states that an item devalues with more supply than demand. Conversely, it increases its value with more demand than supply. Feasible market conditions favor a stabilized and sustainable supply and demand in stock exchanges.
Present your children with four chocolate bars and some money. Give yourself and each of them one chocolate. Then, ask one of your children the amount they will pay for the last chocolate. Next, ask your other child if they’re willing to increase the price to get it. If one of them reaches their maximum spending amount, he or she gets the last piece.
Price Determination: Estimated Chocolate Prices The Next Day, Week, and Month
Stock market prices change every hour, making many people pay attention to profits that minute movements can make. Truthfully, it can be too technical even for the average adult to grasp precision stock market pricing. However, by understanding several principles, you can easily explain these concepts to your children.
•Is It Always One Dollar to One Chocolate?
In most examples we’ve listed here, we’ve stressed that it’s often one dollar for one chocolate bar. While it illustrates basic stock market concepts, it does not show some principles of stock pricing. We only explained it to your children that stock prices can change regularly.
You can explain to your children that chocolate makers have different speeds in making chocolate, affecting prices positively or negatively. Makers who have more buyers than others will have higher market value than the rest, allowing them to sell their chocolates at a higher price (or demand higher chocolate content from buyers).
If they can grasp this concept, explain to your children about supply and demand additional chocolate pricing factor.
A refresher for adults: This example talks about revenue growth. It’s the periodic business reports many people and investors read, allowing them to see the trends in the companies’ performances and the industry it belongs in.
•Paid Out Every Four Months
Your children will ask if they’ll receive their chocolate as soon as they purchase it in bulk. Tell your children that chocolate makers take about four months to make new chocolate for everyone.
A refresher for adults: All companies pay their dividends every four months.
•Can You Trust The Chocolate Seller All The Time?
Children easily trust adults who have more knowledge than they do. However, introduce the idea that some chocolate makers might be using inferior ingredients, making their chocolate unhealthy. Additionally, explain that some chocolate makers might have poor-tasting chocolate that no one wants to buy.
In doing so, your children will understand their responsibility to inspect and gauge the chocolate maker’s performance before giving them money or chocolate to make more chocolate.
A refresher for adults: The investigation of a company or investment fund’s credibility is critical to ensure they will provide your dividends and back up their estimates.
Making Investments in The Chocolate Market
Your kids have enough money to buy some chocolate in bulk. They know how they can receive their chocolate and calculate its estimated value increases or decreases. However, tell them they can’t just approach the chocolate company owner. They’ll need to go through a process involving a professional chocolate salesman called stockbrokers.
•Stockbrokers: Chocolate is Mysterious, But Someone Knows Everything About It!
This middleman receives recognition from renowned chocolate makers, allowing them to compile your order and other investors who want to receive more chocolate.
A refresher for adults: A stockbroker is a financial professional responsible for the buying and selling of stocks from traders to companies. Usually, these professional people charge money with a small percentage when you use their services. Additionally, stockbrokers brief new financial traders about money investments, stocks, and first-time use of their software trading facilities.
•Should You Buy Other Brands?
Earlier, we’ve told your kids about chocolate makers making harmful products and some people losing money (or chocolate) because they invested in a poorly-performing company. Tell your child that even those who make the best chocolate can make bad batches.
You can anticipate your child to ask you steps to avoid this. You can tell them that aside from chocolate makers, they can work with candy and toymakers too. Some candy and toymakers accept chocolate to make new candy and toys. Alternatively, your children can ask these companies to convert the candy and toys they’ll receive into chocolate or money.
Once again, remind them that making investments with a company that offers different products or services gives them a safety net for their money (or chocolates). If the candy or chocolate makers fail to make a good batch, their spending on toymakers will give them significant profits and act as a safety net for any situation.
A refresher for adults: Diversification is one of the wisest advice to use for anyone investing in the stock market. Investing in just one market will lead to huge losses if the market underperforms during a period. With diversified assets, investors can have returns that allow them to take advantage of low-priced opportunities from companies with high revenue growth.
An alternative to chocolates, candies, and toys are games and apps that focus explicitly on diversifying assets. Here are some of them.
Monopoly: A child-oriented board game about ownership. It illustrates commerce by allowing kids to buy properties, earn a profit, manage businesses, and more. It even has fake money for detailed immersion.
Wall Street Survivor: An in-depth (and slightly technical) program and app available on all platforms give you a practice amount of $100,000. Additionally, you can invest in actually-existing businesses and use updated valuation on trends, stock values, prices, bulk requirements, and more.
It’s Easy to Teach Your Kids With These Simple Examples
You can teach your kids about the stock market if you allow them to perceive it as simple as values they see in chocolates, toys, candies, and other objects they have a full understanding of. Truthfully, if you or other adults feel confused about some stock market concepts, allow someone to explain it to you using ideas, concepts, and paradigms familiar to you.
Learning to invest and have exceptional financial management practices doesn’t have to be when you’re earning money. Children with this concept can start early on savings and investment, and this tutorial can help immensely.