How Supply & Demand Affects Stock Prices: A Lesson for Families
One of the most important lessons in investing is understanding why stock prices go up and down. While many factors influence stock prices, supply and demand is one of the biggest reasons stocks move.
✅ If more people want to buy a stock than sell it, the price goes up. 📈
✅ If more people want to sell a stock than buy it, the price goes down. 📉
✅ Supply & demand works just like everyday items—like sneakers, video games, and tickets! 👟🎟
By understanding supply and demand, kids and families can learn how market trends affect stock prices and make better investing decisions.
In this guide, we’ll break down supply & demand, real-world examples, and fun ways to teach kids how stock prices change!
Step 1: What is Supply & Demand?
1. The Basic Rule of Supply & Demand
Supply = How much of something is available.
Demand = How much people want it.
📍 Example:
If there are only 10 pairs of rare Nike sneakers, but 1,000 people want them, the price skyrockets!
If a store has too many sneakers but no one wants them, the price drops so people will buy them.
💡 Lesson for Kids:
"If a lot of people want something and there isn’t enough of it, the price goes up!"
2. How Supply & Demand Affects Stock Prices
Stocks work the same way as sneakers, concert tickets, and video games:
✅ High demand + Low supply = Stock prices go UP! 🚀
✅ Low demand + High supply = Stock prices go DOWN! 📉
📍 Example:
If Apple announces a new iPhone that everyone loves, more people want to buy Apple stock → The price goes up!
If a company like Netflix reports losing customers, people panic and sell their stock → The price goes down!
💡 Lesson for Kids:
"Stocks go up when people want to buy them and down when people want to sell them!"
Step 2: Real-World Examples of Supply & Demand in the Stock Market
📈 1. Example of Stock Prices Going UP (High Demand, Low Supply)
When a company does something great, more people want to buy its stock, raising the price.
📍 Example:
Tesla (TSLA) Stock Boom:
When Tesla announced strong electric car sales, more investors wanted to buy the stock.
Since many people wanted Tesla stock and few were selling, the price rose rapidly!
💡 Lesson for Kids:
"When lots of people want a stock, its price will increase!"
📉 2. Example of Stock Prices Dropping (Low Demand, High Supply)
If a company has problems, investors panic and sell, making stock prices fall.
📍 Example:
Facebook/Meta (META) Stock Drop:
When Facebook (Meta) reported fewer users, many investors sold their stock.
Because so many people were selling and few were buying, the price fell quickly.
💡 Lesson for Kids:
"When lots of people sell a stock, its price will drop!"
🎟 3. Fun Supply & Demand Comparison: Concert Tickets vs. Stocks
Imagine a famous singer announces a concert in a small stadium with only 1,000 seats:
✅ If 10,000 people want tickets, prices skyrocket—just like a popular stock!
✅ If barely anyone wants to go, ticket prices drop—just like an unpopular stock.
📍 Example Activity:
Have kids pretend to buy and sell concert tickets to learn how prices change with demand.
💡 Lesson for Kids:
"Stock prices work just like concert tickets—the more people want them, the higher the price!"
Step 3: How Families Can Track Supply & Demand in the Stock Market
✅ 1. Use Stock Tracking Apps
Kids can track stock prices using free apps like:
Yahoo Finance 📊
Robinhood (for teens) 💰
Fidelity Youth Account 🚀
📍 Example Activity:
Have kids watch how a stock’s price changes based on news and trends.
💡 Lesson for Kids:
"Watch how stock prices change when companies announce big news!"
✅ 2. Play the “Stock Market News Detective” Game
Kids find a news article about a company.
Predict whether the stock price will go up or down based on demand.
Check back in a week to see if they were right!
📍 Example:
If Nike announces a new sneaker, will demand for Nike stock go up?
If McDonald's reports a bad earnings report, will the stock price drop?
💡 Lesson for Kids:
"News affects supply and demand—pay attention to big events!"
✅ 3. Try a Family Investing Challenge
Give kids $1,000 in pretend money and let them “invest” in real stocks.
Track how their stocks move over 3 months.
Let them guess why the price went up or down.
📍 Example:
If they “buy” Apple stock and it goes up 10%, ask them why—was it because of a new iPhone release?
💡 Lesson for Kids:
"Learning how demand affects stocks helps you become a smart investor!"
Step 4: How to Start Investing as a Family
✅ 1. Open a Custodial Investment Account
Parents can help kids invest in real stocks by opening a custodial account.
🔹 Best Brokers for Kids & Teens:
Fidelity Youth Account – No fees, great for beginners.
Stockpile – Allows kids to buy small pieces of stocks.
Charles Schwab Custodial Account – Great for long-term investing.
📍 Example Activity:
Have kids pick a stock and watch how supply & demand affects its price.
💡 Lesson for Kids:
"Investing young helps you grow money over time!"
✅ 2. Invest in Blue-Chip Stocks with Long-Term Demand
Instead of short-term risky stocks, teach kids to invest in strong companies that always have demand.
📍 Examples of High-Demand Stocks:
✅ Apple (AAPL) – People always want iPhones.
✅ Disney (DIS) – Families love Disney movies.
✅ McDonald's (MCD) – People will always eat fast food.
💡 Lesson for Kids:
"Invest in companies people will always want!"
Conclusion: Help Kids Master Stock Market Supply & Demand!
By understanding supply & demand, kids and families will:
✅ Know why stock prices go up and down.
✅ Learn how to invest based on real-world trends.
✅ Make smarter investment decisions.
✅ Build long-term financial success!
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