You made excellent progress with your child and encouraged him to move some of his savings into mutual funds or stocks. Unfortunately, with a down economy, he is seeing all of his hard work and savings evaporate into thin air. Here are some activities to help your child through a difficult lesson in money management.
1. Graph the BalancesMake a graph of the balances of his account over time. Hopefully he'll see that even though he has had days or weeks of losses, he still has much more than he started with. This can drive home the concept of long term investing.
2. Compare to a Savings Account
Calculate the amount he would have in his savings account
had he left his money there. Even though he has less than he had at the top of the market, he should see his investing paying off versus leaving it at the bank.
3. Predict the FutureUnfortunately, if he just recently began investing, chances are the first two ideas will only make his heart slump deeper. Consider graphing the future, what his account balances will be in 18-20 years. You can make a plan to plot his progress with the plan each year.
4. Stay the CourseEncourage your child to stick to his investing plan. Remind him that investing is for the long run, and short swings in the market should not change his plan.
6. Show Stocks on Sale
Continuing to invest in a down market can be a very lucrative strategy, even if the market doesn't rebound for a few years. See a great example in Recovering From a Stock Market Decline
7. Interview a RelativeNow is a great time to teach your child about the Great Depression. Encourage them to talk to an older relative who lived through the depression and learn about what life was like. It can be a very eye-opening experience for your child, and will likely put some of his current expectations about money into perspective.
8. Brainstorm with Your ChildIf your child's investments took a hit, chances are so did your retirement accounts. Without worrying your child, have an open discussion and brainstorm as a family what to do. His creativeness and problem solving ability might surprise you.
9. Move On
After all, he's still a kid. Let him be a kid. Move on and spend time on hobbies, activities, and family fun that doesn't dwell on the economy
. Create a positive environment for him and you'll bring him a lot of the security he needs.