Investors commonly focus on their portfolios to ensure the next generation is taken care of, alleviating worry for themselves later in life. Another step is teaching your children or grandchildren about investing. Helping them understand the guiding principles is a golden opportunity to start them on a solid financial path.

Holiday time together presents a unique opportunity for passing on this precious gift of financial knowledge, and while conversations largely depend on age and maturity, there are effective approaches for children of all ages.

Start with savings. Savings should come before investing. Make sure your children have a firm grasp of the importance of saving. If they have a regular job, discuss the idea of setting aside about 10% of their earnings. Consider opening a savings account for them and discuss how interest works. These are important first steps in learning how to manage money.

Keep it simple. As obvious as this seems, use your children’s language, not sophisticated financial terms. Start by explaining that investing is a means of using their money to create more money. Keeping it simple will help your kids understand and embrace the concepts.

Use a real goal. Make investing real by focusing on a tangible goal that is important to your child like a new toy or their first car. By showing them how investing money on a regular basis can help achieve their goals, you’re more likely to catch—and keep—their attention. Set financial milestones along the way and celebrate when your child reaches them. Posting a “savings graph” that shows their progress is a fun way to track their savings.

Explain stocks with familiar companies. Kids are drawn to the idea that buying a stock means buying a piece of a company; the stock can rise or fall as the company succeeds or fails. If you tie the concept to a company they know, say a sports or beverage brand, they might be more interested in following its progress. You might purchase a single share for them so they can experience ownership firsthand.

Try virtual investing. That said, you don’t need to actually purchase a share of stock; rather, you can show your children how to research stocks online. Once again, choose companies whose products are familiar and, this time, have them “buy” ten shares of a few companies they like. Record the “purchase price,” monitor the performance, and after a while, have them calculate how much they gained or lost.

As you and your children explore investing together, remember to have fun and keep it light. Emphasize the benefits of long-term investing (the longer you have to invest, the greater the chance for growth), compound growth (encouraging reinvesting earnings, like a snowball that gets bigger as it rolls downhill), and diversification so you don’t put all your eggs in one basket.

Passing on financial knowledge is a wonderful gift and a fun bonding experience. It can also be very profitable for your kids and grandkids down the road.

This editorial was adapted from “Financial Basics for Your Kids and Grandkids” by Reesa Manning which first appeared in the March/April 2013 edition of Desert Health.