It is possible for minors to open a demat account under the guidance of their parents or a legal guardian. Understanding investments and trading from a young age will strengthen their knowledge about financial instruments and their benefits. Online trading will teach them lessons that can help them make financial decisions easily in the futureInvestment And Trading().
You can tell them, what is Demat account, Saving and Trading accounts as well. Here are a few ways through which your kids can learn life lessons from investing and trading in stocks:
Starting Investments Early
Generally, investments provide better returns over a longer term. As early investors, they have a better chance of collecting enough wealth till retirement. Therefore, as parents, you must allow your kids to invest in different instruments and guide them enough to improve their understanding of investment instruments and concepts.
Motivating your kids to invest in stocks early will provide them with lessons on personal finance. They will be able to make financial decisions easily once they learn to evaluate market conditions, risks, and other aspects of financial instruments. It will help them to make smart investment decisions that can help them in their future.
Understanding the Ups and Downs
The stock market conditions cannot be predicted in advance as they fluctuate quite often. When a stock goes down, you can either be patient or get rid of them at the right time. You also have to determine the right time to sell the stocks that are doing well. This teaches the kids to make the maximum use of opportunities. They also understand that life is full of opportunities if one is patient enough to sustain the difficult times. Also, the market turbulence will make them mentally stronger and this might help them make wise investment decisions for their future.
Relation Between Risks and Rewards
In the stock market, taking risks can help investors in booking a higher reward. Sometimes, this trick might backfire but nonetheless it will make you understand the relation between rewards. When you introduce your kids to stock marketing trading at a young age, they will learn how to balance risks and rewards to enhance their financial health. While they grasp the share market basics, they will also be exposed to several financial terms and concepts that are only taught in professional courses.
To invest in the stock market, the kids will have to follow a proactive approach. They will learn how to assess the risks and opportunities in the market in advance. Also, when the market is catching up, they will sell fundamentally weak stocks. When the market falls, crashes will pick up the stocks that have the potential to grow quickly. Thinking and acting proactively is an important life lesson as one needs to be prepared for different crises and emergencies in life.
There are many other advantages of introducing kids to trading and investing in the stock market. However, there are some disadvantages as well. If you simply hand over the money required to trade to your kids, they might not understand its significance. Due to the gamification feature of trading platforms, it is easy to buy and sell stocks.
This can entice kids to make grave mistakes like choosing the wrong stocks or engaging in complex trading activities without getting complete knowledge about them. Therefore, as a parent, you must always guide and monitor their trading activities. As a parent, you must explain to them the demat account meaning and how it works. You can ask them to read books about personal finance and investments before indulging in heavy trading.