Trading Lessons for Kids: Why My 8-year-old Trades CFDs

Unconventional Parenting or Hidden Wisdom?

Let's start this off with a disclaimer: I'm not your typical parent.

If it’s Friday and the sun’s shining, my kids are more likely to be somewhere remote camping with me then at school. My 8 year old has for some years been headbanging to AC/DC and Foo Fighters, over the wiggles. And while most mums and dads are teaching their kids the ABCs, I'm showing my 8-year-old how to trade CFDs on a demo account. But before you call child protective services, hear me out. I promise it's not as insane as it sounds.

I've always believed in unconventional ways of learning, and trading shares or indexes can offer some valuable life lessons.

1. Humility

Let's face it; the world of trading can be a humbling experience for even the savviest of adults. The stock market, with all its ups and downs, can bring even the mightiest investors to their knees. So, why on earth would I want my kid to experience this?

Well, I believe humility is a lesson best learned early in life. By watching the value of their ‘trades’ swing wildly from green to red, profit to loss, my kids are learning that no one has all the answers, and no matter how good you think you are, you’re going to be proved wrong, a lot. It's a lesson that I think will serve them well in all aspects of life, from school to career and beyond.

2. Discipline

Kids can be impulsive, especially in today's ‘instant gratification’ world. Teaching them discipline is crucial, and trading stocks or index CFD’s provides the perfect opportunity.

When my child trades, they quickly realize that success isn't about making impulsive decisions. It's about creating a strategy, sticking to it, evaluating updated data if needed, and having the patience to see it through. Trading teaches them the value of delayed gratification, a skill that will benefit them in school, relationships, and their future endeavours.

3. Risk Management

Probably the thing that I spend most of my time considering in trading is risk management, and this is where I reckon trading can truly shine as a teacher. My little trader is learning that they should never put all their eggs in one basket. Diversifying their portfolio, setting stop-loss orders, and carefully calculating position sizes are skills they're developing early on.

This concept of managing risk doesn't just apply to trading; it's a life lesson that can hopefully help prevent them from making some of the reckless decisions in their personal and financial life. It's like teaching them to wear a helmet before they hop on their bicycle — a bit of prevention goes a long way.

4. Patience

In the age of instant messaging and streaming, patience is a virtue that's quickly fading away. However, trading demands patience in spades. My 8-year-old is learning that they can't expect instant results; they need to give their trades time to develop.

This lesson in patience will hopefully spill over into other areas of their life, from waiting for their favourite TV show's next episode to practising a musical instrument. The realization that success often requires waiting and hard work is a lesson they're learning early, and it's priceless.

5. Emotional Control

One of the most challenging aspects of trading is keeping emotions in check. Fear and greed are the two monsters lurking in the shadows of every trade, ready to pounce and wreak havoc. My kids are learning that giving in to these emotions can lead to disastrous results.

By learning to control their emotions in a high-pressure (fake) trading environment, my boy is hopefully developing emotional intelligence that will serve them well in the real world. They'll be better equipped to handle stress, conflicts, and difficult situations with a bit more composure.

6. Financial Literacy

Let's not forget the most obvious lesson of all: financial literacy. I reckon 99% of people I talk to agree how crazy it is that kids are taught more financial education in school Most kids don't learn the basics of money management until they're out in the real world, often making costly mistakes in the process. In combination with our regular Economics sessions (right answers are rewarded with chocolate), by introducing my kids to trading, I'm laying the groundwork for a solid financial education.

They're learning about concepts like compound interest, asset allocation, and how to read financial statements. These are skills that will help them make informed decisions about their own finances as they grow up, hopefull setting them on a path toward financial security.

Addressing the Elephant in the Room: The Risks of Trading

I recognize that some might be raising their eyebrows at the idea of introducing children to the world of trading, given its inherent risks. It's a valid concern. The financial markets can be volatile, and real-money trading can lead to significant financial losses if not approached with caution. However, the trading environment my kids are exposed to is a simulated one, with no real money at stake. This controlled setting allows them to experience the dynamics of trading without the risks. Furthermore, our trading sessions are always coupled with discussions about the importance of financial responsibility, the unpredictability of markets, and the dangers of overconfidence. It's not just about celebrating the wins; it's equally about understanding the losses and learning from them. In essence, the goal isn't to groom them into traders but to instill valuable life lessons using trading as a tool.

Teaching kids trading might not be for everyone, and it certainly has its risks, but in my mind it's offering my 8 and 10 year-old some invaluable life lessons.

Cheers

Marto