How much do teens know about investing?

Investing, it seems, is hot.

Well, if the group of about a dozen “future investors” aged 13 to 19 who participated in a recent InvesTEEN 101 seminar I sat in on are any indication — a fair bit, actually.  Presented by Toronto chartered accountant and financial planner Stan Tepner, the session was an eye-opener to me not only in terms of how much these young people already know, but also the degree to which they were interested in the topic. Investing, it seems, is hot.

Or maybe it’s all in Tepner’s approach. By asking some pointed questions, he got the teens onside and discussing things that matter to them. Here are a few of Tepner’s successful conversation starters that you can try at home:

  1. What companies are involved in your life?
    One guess as to what the first response was in a room full of teens. That’s right, Apple. (Duh!) Also mentioned were Google, Facebook, McDonald’s and Coke. Now that you’ve got their attention, it’s a perfect segue into a discussion about how some companies are privately owned while others split their ownership into shares that are listed on stock exchanges.
  2. Speaking of McDonald’s, how much does a Big Mac combo cost?
    Tepner was definitely speaking the crowd’s language when he used this example to explain the concept of inflation: “When I was in university, a Big Mac was 75 cents and a combo was $1.01. That’s inflation.” Whoa. Then he went one step further and talked about how inflation can eat away at the purchasing power of savings—which is why it’s helpful to own investments that increase in value at a rate greater than inflation.
  3. If I gave you a choice of owning stock in Coke only, Pepsi only or both Coke and Pepsi, what would you do?
    Tepner explained that the smart investor would ignore his or her taste preference for one cola over the other and go for shares in both. Why? Diversification. “If one bombs out, at least you’re invested in the other,” he says.
  4. Is borrowing money good or bad?
    Neither. Or both. It depends on what you’re borrowing for. Borrowing for a house or for university are good reasons, says Tepner, because the value you get from a home or post-secondary education is greater than the interest you’d pay on the loan. On the other hand, it doesn’t make sense to borrow money for a bond purchase, because the rate of interest you’d pay on the loan would be higher than the rate of interest you’d collect on the bond.
  5. If I gave you $1,000 for university, what kind of investment would you make? What if the $1,000 was for your retirement?
    This is a great way to introduce the idea of risk and time horizons: finding safer options for short-term investments while taking on more risk (and the possibility of higher returns) for long-term ones. As Tepner made clear to his young audience, “In investing there are all sorts of ways of making money, but there are just as many ways of losing money.”

About the Author

Tamar Satov

Managing Editor, CPA magazine
Tamar is a journalist specializing in business, parenting and personal finance. She blogs regularly in this space with advice and anecdotes on her efforts to raise a money-smart kid.

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