The answer is never. It is never to young to invest. Just like everything habit we have developed over our lifetime, those that we developed early are most strongly woven into our lives. If you are looking to help a child invest, there are a few helpful steps that you can take.
1. Start at birth. Obviously your child is more concerned with napping and eating at this point so step in for them. Young children are often given savings bonds or other monetary presents. Keep these in a separate account just for the child. When they begin to understand what money is, having a little set aside will be a terrific first start.
2. When your child is 3 or 4 begin giving them an allowance. This should be based on some way to earn it (small household chores, etc) and it should increase with age/responsibility. When you give the child the money each week, sit down with them and divide it up. A certain percentage of every allowance should be set aside for long term savings and another percentage set aside for something they want in the short term. Children will never understand saving for retirement, or college, or any other big ticket item at this point. A short term savings plan should be something like a treat every month, a new toy, etc. One of the most creative tools I have seen for this is a piggy bank divided in to different sections.
3. Grade school and middle school children should be introduced to the stock market. There are some fun ways to do this. Each quarter have your child look through the stock section of the paper. Let them pick out a stock and then make a game of it, checking it each week. At the end of the quarter add up what they would have earned and discuss it with them. Doing this for an extended period of time will expose them to ups and downs of the market and learning to understand what it’s all about. If you don’t exactly understand it yourself this is a great way to learn with your child.
4. If you have opened a college fund for your child (which I hope you have), read the monthly, quarterly and annual statements with them. Showing them how their funds are actually doing and what they will accomplish is a great way to teach your children about savings.
5. As your child approaches high school they should have a great grasp of investing and what it means for their future. If you work with a financial adviser, discuss with them the possibility of taking a few minutes after each meeting to sit down with your child about their finances. Most advisers will be willing to spare a few minutes for your child. Have them briefly describe the benefits of saving for retirement and investing for their future.
If you can follow a few of these tips your child should grow up to be a very responsible saver and planner. Starting as early as possible will develop habits that will last a lifetime.