Teach your kids the difference between an investment and a scam
Children are trusting, which makes them more susceptible to falling for scams – which criminals are sadly willing to exploit.
According to a survey by the Australian Securities & Investments Commission (ASIC), 22% of young people aged 15 to 21 experienced a situation where they felt ripped off or exploited financially.
When teaching your kids about investing, you should also teach them to spot the difference between an investment and a scam. That means doing these five things.
1. Educate them on investment basics
If your child is interested in investing, start teaching them the basics. Explain what investing is and introduce them to some traditional forms of investment, such as:
● Term deposits (explain how they differ from a savings and transaction accounts)
● Shares (also called equities)
● Managed funds
● Exchange-traded funds
● Commodities like silver or gold
● Property
● Superannuation funds
Explain that all investments carry a degree of risk and that there’s often a trade-off between risk and reward.
2. Warn them about get-rich-quick schemes
One of the hallmarks of an investment scam is the promise of high returns in a short period. While some investments can deliver excellent returns quickly, most need time to grow.
Warn your child that if someone presents them with an investment that promises to make a quick buck, no matter how enticing it seems, it’s probably best to give it a miss. If it sounds too good to be true, it probably is.
3. Show them how to conduct due diligence
One of the principles of smart investing is to do thorough research. Learning how to do due diligence is a skill that will help your child avoid bad investment decisions as an adult.
You can take your child through the step-by-step process of researching an investment opportunity by showing them what positive signs to look for and how to spot red flags.
4. Tell them to ignore unsolicited messages
Many Australian kids have a mobile phone. This makes it easy for scammers to reach out to young people through text messages or on social media.
For example, your child may receive a message from a scammer asking them to invest in a cryptocurrency that “guarantees” massive returns. The scam may include false testimonials from other investors claiming they’ve made tens of thousands in just a few weeks.
To avoid falling prey to a scam, tell your kids to ignore unsolicited messages making outlandish investment promises. No investment can offer guarantees as markets tend to fluctuate.
5. Advise them not to hand over money when pressured
One tactic scammers use is to pressure you to take action immediately, often by creating a false sense of urgency. Impress upon your child that they should never hand over money to someone they don’t know, especially when pressured to do so.
With FLX, age-inappropriate merchant categories are restricted, there is no cash out, and there is 24-7 fraud monitoring on FLX Cards.
FLX is a great way for kids to learn how to earn, spend and save while you get to keep an eye on their spending. You can find out more here.
This is general advice. Read the PDSs & TMDs at www.flexischools.com.au/legal before deciding if FLX is right for you. The FLX Services & Flexischools are provided by InLoop Pty Ltd ABN 27 114 508 771 AFSL 471558 (trading as Flexischools). The FLX Prepaid Mastercard is issued by EML Payment Solutions Limited ABN 30 131 436 532 AFSL 404131 pursuant to license by Mastercard Asia/Pacific Pte. Ltd.