This year, Robinhood and its millions of younger-than-average customers have found themselves at the center of attention that is both comic and tragic.
Gunslinging young investors are making stock ownership seem like a terrible idea for novices. But owning equities, with limits and guardrails, can teach kids plenty.
“Robinhood: ‘We now allow teenagers with their parents’ credit cards to trade stocks’” went the April headline on the satire site, Stonk Market. Two months later, the headlines were far more sobering, after a 20-year-old killed himself, leaving behind a note about his negative Robinhood balance.
Robinhood’s customers trade fast — often in particularly volatile types of investments — and can lose lots quickly, as my colleague Nathaniel Popper reported in July. Customers have gone to its headquarters to complain, and the company has installed bulletproof glass.
All of this activity frightens many parents, and with good reason. But owning just a few shares of a company’s stock is something else entirely, and it need not lead to ruin or ingrain bad investing habits. It may actually be the way to build good ones.
Learning about financial risk can be challenging for children whose families have never faced much economic hardship. Nevertheless, it’s a crucial lesson.
The best way for most people to save enough for retirement is to start early, invest most of the money in stocks early on and hang on tight for half a century. Watching with dread or exhilaration as balances fall when the market swoons or rise when it booms can lead to poor decisions. The earlier someone experiences that volatility and learns how to react to it, the better.