How To Explain the Concept to Your Children:
Believe it or not, anyone can be an owner of large companies like Apple, Microsoft, and Walmart. When companies raise money to pursue their goals, they offer what is called “equity” or shares in the company for purchase. The stock market is where individuals can buy and sell small pieces of these large companies.
The price of these pieces can go up or down, depending on how much money the company is making or its plans for the future. Just like in a physical store, if an item becomes really popular and many individuals want it, the buyer will be able to charge more for the item. The stock market is where you can find thousands of different company stocks. Putting money in the stock market with the hope that the shares you purchase will become more valuable is a form of investing.
How to Teach Your Children:
Take your child to the supermarket and talk to them about the different brands they can find there (e.g., Kellogg, Nestle, Heinz, General Mills). Look up the share prices of these companies with your child and check in on their value every once in a while. You can Google the companies or you can download an app to track the prices. You can do this with any of the products you purchase, from appliances and electronics at home to the make of your car.
As your child becomes familiar with the idea of owning portions of companies and buying and selling them in a market, they may enjoy additional educational resources like an online stock market game.