In a perfect world, as you gain in knowledge and your portfolio gains in value, you’d pass your wisdom on to your kids and grandkids. You’d be confident that, when the time comes and your estate passes to them, they’d know how to manage it. They’d not only reap the benefits of all of your hard work and dedication, but they’d be wise enough to know how to nurture it so it would continue to grow and flourish.

 

But, of course, this isn’t a perfect world. And no matter how enthusiastic you are about studying the intricacies of long-term investing, no matter how big a success story your portfolio is, the reality is that your kids might be like sponges – ready to take it all in. Or, they might not.

 

Either way, you need a plan. Sometimes that plan involves getting young people started as kids, or as young adults. Other times, it means having a back-up plan in case, despite your best efforts, they don’t share your interest and enthusiasm. Here are some thoughts and ideas from fellow investors who have been there, done that:

 

“Basic personal economic lessons are not taught well -- or at all -- in our schools,” says Mendi Tackett, a member of the Granbury, Texas-based Women With Cents Investment Club. “I frankly have never understood why so many kids in high school will be taking calculus, but don't understand the basics of balancing a check book, saving, or the threat of using too much credit.”

 

Mendi and her husband, Chris, who have two children, Hayden, 9, and Kennedy, 5, decided to take the matter into their own hands. “On numerous occasions, while I am looking at the business section, I have taken the time to explain what the ticker symbols mean and show our son, Hayden, how the numbers translate," she says. "We don’t expect that he’s going to be able to do that himself or even remember it all yet, but with time and continued exposure, he will.”

 

It’s not so important that Hayden may be too young to find a company’s ticker symbol on his own. What is important, Mendi points out, is the exposure he’s getting at a very young age. “Parents need to start with the little things when their children are in elementary school,” Mendi says. “I can now see that these lessons are as important as knowing how to read and should be taught in the same way. Start with little steps and build on them.

 

“It is important for kids to grow up feeling comfortable with their finances and understanding how they work,” she says. “And, as they get older, it’s crucial for them to know what their personal responsibility is in securing their retirement.”

Start an Investment Club.
What do you do if your kids or grandkids are already past school-age? Don’t worry; all’s not lost. There’s still plenty of time to teach them the basics. And one great way to do that is to help them start an investment club.

“I bought copies of the BetterInvesting book on investing for young people,” says Carol Clemens, founder of the Clever Change Investment Club in Edmond, Oklahoma. “ We're starting a ‘Cousins Club’ for our granchildren.”

 

For now, the club’s members will concentrate on the education the club offers. “Initially there will be no monthly sum required of them because they are not of working age, or they are saving for college,” Carol says. “But there will be strong pressure to put excess birthday and holiday money in for investing.

 

“Each receives a generous gift from us at graduation from high school, which will be invested in the club. We plan to send each of them completed stock studies, and encourage them to nominate certain companies for study and, we hope, discussion.

 

“I believe gentle introduction and consistent exposure coupled with lots of encouragement and reinforcement will plant a seed over the years that can help them blossom into life-long investors,” Carol says. “Our plan is just to keep exposing them to the fundamentals of stock analysis until they are out of school, then gradually start turning the functioning of the club over to them.

 

“We hope this will be the start of an ongoing interest in investing, as well as a means for all of them to stay in touch over the years,” she says. “Should any of their parents show an interest, we may even open it up to their generation. Who knows what will develop?”

 

Invite Them to Join Your Club.
“Some of our elder members have had their children join our club as non-voting members so they can learn about investing,” says Connie Fournier, a member of the 16-year-old Partners In Prosperity Investment Club of Minneapolis, Minn. “Our hope is that, when they turn 18, they will join as voting members.”

 

Though that hasn’t yet happened, club members know that some exposure to investing is certainly better than none at all. “We continue to discuss adding younger members to the club in order to share ideas, educate and transition to the next generation,” Connie says.
 
If All Else Fails…

Sometimes, no matter how much encouragement you offer your kids or grandkids, the fact is, they’re just plain not interested. Investing and the intricate workings of personal finance just don’t appeal to them. So, what do you do if your kids fall into this category?

 

Accept it – and then work with things the way they are. “My kids are aware of what I do, but they don’t have the interest,” says Bob Adams, a long-time investor who serves as a volunteer Director on the Board of InvestEd, Inc. “And if they don’t have the interest, then they’re not going to be good at it – and they shouldn’t be doing it. So, I don’t push it on them.”

 

That said, Bob has a back-up plan. “I’ve written a letter to each of them, advising them, when the time comes, to go to all cash, and then invest that cash in index funds,” he says. “Index funds have performed much better historically than managed mutual funds. So, I feel confident that if they go that route, they will do relatively well.”

 

One final note is to make sure that, wherever you’re at, you start – and continue – the conversation. Bob and his wife, Cris, chose this past Mother’s Day as an opportunity to do just that with their three adult kids. “This is the kind of thing people don’t want to talk about – but you’ve got to do it,” he says.

Bob says their kids – who weren’t expecting the family meeting that took place on Mother’s Day – were a little shocked. But, he recognizes it as a first step. “We’re hoping to organize another meeting at some point so that the kids can ask questions,” he says. “And we’re hoping to plan an annual meeting so we can continue the conversation.”