Empowering Your Children’s Financial Futures: Lessons from Meme-Stock Mania and Building Long-Term Investment Plans

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This week’s insight puts the spotlight on your children and their financial futures.

Remember GameStop and meme-stock mania? It reached a crescendo about three years ago as much of the nation remained hunkered down due to the pandemic. Shares of small and speculative stocks rose meteorically, stunning even the most seasoned traders on Wall Street. A myriad of factors contributed to the craze – excess savings from all those stimulus measures, new trading apps just a swipe away, workers and students logging in from home, and even the psychological need to feel connected to others.

Many college kids, even some high schoolers, got in on the game. While anecdotes vary from scoring fast money to buying at the top and seeing savings immediately wiped away, young people were drawn into the excitement of the stock market.

The problem is that investing should not be a thrill ride; it should be boring. That means consistently putting away money into low-cost and diversified funds every two weeks or once a month, ideally into tax-advantaged accounts like 401(k)s, IRAs, and Health Savings Accounts (HSAs).

Meme-stock mania, while a short-run phenomenon, may have long-lasting positive effects, though. Those same teens and young adults are a few years older and wiser today. Following a bear market in 2022 and an AI-dominated bull market over the last year-plus, it’s clear that simply participating in the world’s greatest wealth-creation mechanism is all that must be done. It doesn’t require moving in and out of the market or even picking the next NVIDIA. It’s the opposite – the simplest actions usually beat the most complex and hands-on strategies.

My hope is that Gen Zers, as they embark on the workforce, recognize this. Your children may know more about stocks and markets than you think, but it still takes effort to ensure they go about building long-term investment plans the right way.

If you have kids under age 18, consider opening custodial accounts or even a Roth IRA for them. When they reach legal age, the accounts transfer to the children. Major brokerage firms report that such accounts have grown in popularity in the last handful of years.

Financial literacy is one thing, but taking action to get your kids on the right financial footing early on can truly put them on the fast track to success.