Getting kids interested in the stock market is a very rewarding experience. Gaining an understanding of this massively powerful compounding machine for wealth creation gives young people a head start on the journey to creating wealth. The longer they can give their share market investments to work, the more rewarding the experience is likely to be, because the share market is ultimately a way of getting rich slowly. (You can read more about actually buying shares for kids here.)
According to research firm Andex Charts, the Australian share market’s main index (since 1980 the S&P/ASX All Ordinaries Accumulation Index), which counts all dividends as reinvested, has earned 12.1% a year, well ahead of both bonds, at 7.4% a year, and inflation, at 5.2% a year. The stock market’s performance has turned $100 invested at the beginning of 1950 (the equivalent of $2,556 in today’s dollars) into $153,634.
Make it relevant
I am helping a Year Nine student at the moment with a school project on the share market, and while I am certainly telling him about this long-term track record of the market, I’ve found that before that, I have to make the idea of the market relevant to him – the things that he knows, and to which he can relate. So while I am telling him about how an investor buys shares and becomes a part owner in those companies, the examples that I use are familiar to him.