Teaching Your Kids About Money & Impact Investing

National Endowment for Financial Education found that parents have the greatest influence on their children’s financial knowledge—more than work experience and high school. As a mom and financial advisor, I understand how important it is to raise financially savvy kids. I’m the eldest of three girls and my dad prepared us for the financial world. My Dad taught me how to read Value Line and purchased IBM stock via payroll deduction.

Children and teens connect with creativity, excitement and newness. If you just lecture, you will only get loud sighs and eye rolls. Finding real-life connections will keep them engaged and interested as you explain not just their personal finances, but also big picture ideas like impact investing and planning for the long-term.

Encourage Your Kids to Invest in What They Like

Ask your child what products they like buying and why? Research has stated Millennials and teens invest in products from companies  with a social mission. H&M stores have a recycling initiative where shoppers can drop off unwanted garments, no matter what brand or what condition, in all H&M stores across the globe. H&M Foundation has partnered with The Hong Kong Research Institute of Textiles and Apparel to develop technologies to recycle clothes made from textile blends into new clothes. (For related reading from this author, see: How Millennials Can Use Impact Investing to Do Good.)

One World Play Project sells durable dog toys and soccer balls. The company gives thousands of soccer balls and play resources to organizations working with youth in disadvantaged communities worldwide.

Money Doesn’t Grow on Trees

Teen and young adults are often quick to follow trends and model our behavior. It is important to discuss developing a budget and planning for household expenses. If your child drives, outlining the costs (gas, car insurance, maintenance) associated with keeping him or her on the road is a practical learning experience. Using everyday experiences as a teaching opportunity can help your kids become financially savvy adults. To further expand upon this experience, you can ask your teen to research the company’s corporate responsibility profile and commitment to communities where it conducts business. For example, Speedway has partnered with both the Children’s Miracle Network and United Way to support children and families in need. Citgo also supports different initiatives and outlines their priorities in their corporate social responsibility report on their website.

Educate Your Kids About Small Business

Discuss how some people venture out and start business of their own. Have your child come up with a skill or hobby such as making cookies or creating friendship bracelets. Have the child look up how much it costs for materials such as chocolate chips or yarn for the bracelets. How many items do they want to make?

How will they sell the items and what should they charge? While supervised, allow the child to make a stand outside to sell their products. How much did they sell? Deduct the amount of the materials from the grand total. Explain this is how businesses determine a profit. What was left over? Another option is to encourage your child to research the stock of a company they respect and admire.

Impact investing represents a tremendous opportunity to engender social and environmental change while still achieving a return on capital. As parents, we don’t realize that financial literacy and investor education can have the greatest impact on our children’s ability to grow and manage their wealth.

(For more from this author, see: What Is Tactical Asset Allocation?)