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'I' is for investing: teaching kids the basics

When many of today's parents and grandparents were growing up, teaching a child about money meant a discussion about spending responsibly and saving wisely.

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With today's children, those basics are just the starting point.

Your child's basic financial education isn't complete without a working knowledge of stocks and other investments.

Kids will need those investments, since they won't be counting on a company pension and Social Security to fund their retirements.

'S' is for saving
Before you can invest, you need a small nest egg. "Savings and responsible spending are definitely the foundation," says Johnathan Pifher, author of "My First Finance Book." "But it's not enough given the shift, with the responsibility of retirement savings falling to individuals."

Adults may be putting off teaching their children about investing because they don't understand much of it themselves. "Personal finances have gotten increasingly more complex," says Janet Bamford, author of "Street Wise: A Guide For Teen Investors."

"There is a wider variety of financial products and more chances to get confused. There are dramatic examples of people who couldn't afford the subprime mortgages they took out. Think about how much better off everyone would have been if those consumers had truly understood the costs involved," she says.

Teaching the basics of investing
'S' is for spending and saving
The preschool years - 'F' is for familiar and fun
Early elementary -- 'B' is for basics
'R' is for real
'G' is for games
'M' is for mistakes
'S' is for serious
'N' is for now

Working through each stage of investment literacy, parents will have the opportunity to learn alongside their children. "If you are 35 and don't know what that 5- to 8-year-old needs to know, think of yourself as stage one," says Joline Godfrey, author of "Raising Financially Fit Kids."

Her book is divided up into stages of financial literacy starting at age 5. If parents are in need of education before they begin teaching their children, they can start with the first stage to learn how to save, how to keep track of money and how to tell the difference between wants and needs.

Progressing through the stages to the fourth level, readers will be actively saving and investing and connecting their goals to their investments. "It's about stages, not ages," says Godfrey. Once parents are educated, they can begin passing along fiscal lessons to their kids.

So, how to begin educating your kids? Just bring up the idea of investments in conversation as you would any other topic, says Godfrey.

"This is not about formally sitting down and explaining to them, 'this is what's what about money,'" she says. "Financial education has to happen in a drip-drip-drip method."

Next: "Explain what it means to own part of a company."
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