Hey there! It's Talk About Money Tuesday, your favorite day of the week! π€
Despite the uncertainty of tariffs, and an economy that has barely added any jobs in recent months, stocks keep going up and to the right. In fact, they hit record highs this month. Americans now have more money in stocks than ever before, which means it's likely they're getting investing advice from someone β or something β as the data point below reveals...
Money Stat
74%
With so many sources of financial information available, a recent report shows that Gen Z, more than any other generation, uses generative AI as a financial advisor. Seventy-four percent of Gen Z investors said they get financial advice from AI at least once a month, according to Betterment, a financial advisory company. In comparison, about 60% of Millennial investors use AI that often, followed by Gen X at about 40% and Boomers at 19%.
Still, the report showed that most investors have some skepticism about making AI a partner in financial decision making. Only 30 percent of them said that they would "moderately" or "completely" trust AI to give them financial advice.
Smart Money Quiz
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How would investors usually describe a stock when its price is very high but its recent earnings and future growth prospects don't seem to support that price?
A. It's undervalued and a bargain for investors.
B. It's stable and fairly priced.
C. It's overvalued and probably not a smart buy right now.
D. The company is going bankrupt soon.
(The answer is at the end of this newsletter.)
Get in the Zone
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Money skill: The power of compound interest
Why it matters: For young people, one of the most powerful tools in investing is compound interest. It means the money they earn from their investments starts earning money too. It's kind of like stacking wins on top of wins. That's why the earlier young people start saving and investing, the more time their money has to grow.
Try this: To help your kids understand how money can grow on its own over time, use a compound interest calculator together. Just enter a small amount to start, add regular savings, and watch how the total stacks up. They'll be able to see that even without adding regular savings each month, starting early with saving and investing makes a big difference.
The Language of Money
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Talking to your teen about the stock market might feel a bit overwhelming, but it's a great way to help them build confidence with money as they grow up. Understanding how the market works teaches them valuable skills that they'll use the rest of their lives, including how to save, invest, and make smart choices with their cash.
Use these youth-friendly definitions of some key stock market terms to start the conversation with your kid or teen about how the market works:
π Stock market: It's kind of like an online store where you can buy or sell a piece of a company. Prices are always changing based on what's happening in business, the world, or even what people feel might happen.
π Stock: It represents ownership in a company. When you buy a stock, you're buying a piece of that company. A single unit of stock is called a share.
π Share price: How much one piece of a company, a stock, costs right now. It goes up and down depending on how the company is doing and what people think it's worth.
π Ticker symbol: Think of it as a company's nickname on the stock market. It's usually a short group of letters β say APPL for Apple or DIS for Disney β that lets you quickly find a company and trade its stock.
π Diversification: Spreading your money across different stocks means not spending all your money on one company's stock or on one type of investment. With money, spreading it out helps lower your risk if one thing doesn't do well.
π Portfolio: This is just a fancy word for all the different investments you own. Think of it as a playlist, one where you mix different investments to match your financial goals.
π Dividend: Some companies share part of their profits with people who own their stock β sort of like a thank-you payment for being an investor. That's called a dividend.
π Index fund: A bundle of different stocks put together so you can buy a little bit of a whole group instead of just one company. It's an easy way to spread out your risk.
Looking for more youth-friendly personal finance terms to share with kids and teens? βDownload my Language of Money freebie. β
Loose Change
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ποΈ More (and some say riskier) investment options may soon be on the way for 401(k) holders. Federal agencies are hashing out the particulars of how 401(k) plans can offer alternative investments, such as real estate, cryptocurrency, and private equity.
π¨π¦ Canadians have spurned American goods and tourist spots in the wake of strained trade relations between the U.S. and Canada, but "Buy Canadian" doesn't seem to apply to stocks.
π What one personal finance expert calls "unhappy spending" can keep teens from achieving their financial goals. Here's her advice on how teens can learn to spend money on things that really matter to them.
Thanks for reading! Have youth financial literacy questions or money success stories that feature kids, teens, or college students? Reply to this email and ask (or share) away.
If you know someone who cares about youth financial literacy, share this newsletter with them. And if this newsletter was forwarded to you, please subscribe βhereβ.
'Til next time,
Audrey
βFounder/Certified Financial Education Instructor β
The FinLit Zone
ANSWER
C. When a stock's price is much higher than what a company's earnings and growth justify, investors say it's "overvalued." One way to explain this to young investors is to tell them it's kind of like paying $150 to see someone in concert who isn't really that popular yet. In short, they might be paying too much.
If a company doesn't do as well as people hope, its stock price could drop quickly. That's an important risk for teens to understand when they're learning about investing.
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