When is the ideal time to start investing? According to Acorns CFO Seth Wunder, eight years old might be about the right age.
Wunder, a top exec at the personal finance platform aimed at helping people break into markets by investing their spare change, is a strong advocate for early financial education. His view comes from his own experience. He first learned about stock trading as a member of his school investing club in sixth grade. Years later, he says that he’s imparting lessons he’s learned about money and investing to his own children.
“I think it’s really important to start with education,” he told Business Insider. “When you think about the habits you build, the way we talk about building healthy habits for the long term, financial habits are the same as physical habits like going to the gym and taking care of the body.”
His advice comes as markets are increasingly gamified, with risky bets in prediction markets and stock options booming, while social media is awash in questionable financial advice.
In Wunder’s view, early financial education allows parents to help their kids understand what separates informed investing from gambling. He shared the top three investing lessons for parents to share with their kids.
Invest consistently
First and foremost, consistence is key. Wunder cited the power of habit as an important factor that can help young people get started investing early and understand why that matters.
“If we can get the younger generation to understand that even as little as $5 a day is a starting point is the place to start, and then you know to the degree that they want to do more over time, that’s wonderful,” he said.”
Wunder added that for many people, not knowing where to start is what holds them back from investing, but getting started early and keeping at addresses that.
Realize the power of compounding returns
Compounding investment returns may not sound very exciting, but it might be among the wonders of the world. Wunder highlighted the importance of understanding it, noting that parents can frame it as money that comes with no real risk, while also demonstrating the value of patience as an investor.
“Most people don’t want to do the math, but it’s just really simple,” he stated. “A small amount of money every day compounded over time becomes a lot of money. I think that intuitively people can understand that.”
Understand the ebb and flow of markets
The benefits of compounding interest takes time, but as Wunder’s third lesson highlights, understanding the ups and downs of the market over time is key.
Wunder stressed the importance of helping young people understand that there are dips in every cycle, and sometimes that’s scary for an investor, but resisting the urge to panic is highly important. Instead, pullback in the market should be seen as as an opportunity to acquire more stock at a cheaper price.
“The vast majority of the market returns happen on very few days of the year, and you can’t time the market,” he added. “Being consistent with time, like what we say, time in the market as opposed to timing the market is really key. “
