Information About the Stock Market for Kids
Children who understand the concept of money and value are able to learn about the stock market. Stock information can be broken down into basic principles, which children are able to grasp.
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What are stocks?
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A stock is a part of a company and is called a "share." If you own a share in a company, you own part of the company. You can own several shares (or multiple stocks) in a company, which means you own more parts of the company. Every shareholder (which means "owner") has the right to vote on activities in the company. If you own multiple shares, you have more votes.
What is the value of a stock?
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The price of a stock can go up or down depending on how the company performs. If the company does well, the price of the stock goes up and vice versa. There are no guarantees.
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Where do you buy stocks?
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Stocks are bought and sold at places called stock exchanges, which can be live or completely electronic. One of the biggest exchanges is in New York City and is called the New York Stock Exchange, "NYSE Euronext," but there are many exchanges around the world. People who buy and sell stocks for other people are called brokers.
How do you make money?
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The price of a stock changes from day to day. If you buy a stock for one dollar on Monday, it might cost two dollars on Tuesday. If you were to sell on Tuesday, you would have made an extra dollar. However, the stock market changes a lot, so on Wednesday it might cost one dollar again or go even lower. Stock owners make money by buying stock when it costs very little and then selling when it costs a lot.
How to begin?
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Look around you and search for companies you are interested in. For example, if your family eats at Red Lobster every week, you might want to buy some stock from the parent company of Red Lobster (called Darden Restaurants). Find the price of the stock in your newspaper or online. Buy a couple of shares through a broker or just for pretend. Watch the price of your stock every day to see how it goes up and down. After one month, calculate how much money you would have earned or lost if you had sold on that day.
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References
- Photo Credit Image by Flickr.com, courtesy of Perpetual Tourist
