Many parents who want their children to understand investing use a teaching method related to active stock picking. They give the kids real or hypothetical dollars, and invest in individual stocks, like Walt Disney or Nintendo, Electronic Arts or Nike—something the kids relate to.
Then they keep track as prices rise and fall. It's an engaging game, as is the one where students in a classroom compete to see which person can build the best-performing portfolio. But if you believe in passive investing strategies, these lessons skip some of the most important financial concepts: save regularly; avoid high fees; invest not to win, but to reach your goals; and try to take the least risk possible.
CNBC recently spoke with John C. "Jack" Bogle, legendary founder of The Vanguard Group, and president of Vanguard's Bogle Financial Markets Research Center, for ideas about how to teach kids about passive investing.
Stock investing has fallen to record lows since 2009—only 52 percent of Americans own stock, including through retirement plans, according to a recent Gallup poll. The confidence and knowledge to invest is a critical gift to give your children. Bogle provided some pointers on how to overcome the fears, doubts and temptations that might push you off the steady path required of passive investors.