Teach your kids about investing and give them a head start for wealthy future.

In early 2007, eight-year-old Kevin Roth made headlines for his high-performance investment portfolio. It wasn't a flash-in-the-pan kind of fame either: According to MarketWatch.com, Kevin's "second-grader portfolio" is still going strong, beating the S&P 500 by 4 percentage points in the last year and earning a five-year annualized return of 13.18 percent. Hats off to Kevin's dad, a financial planner, who gave his son the right mix of encouragement and knowledge.

Get them started right

Your child doesn't need to know about call and put options just yet, but she should know these basics:

• Risk and reward. A youngster who fully grasps the relationship between risk and reward is better prepared to make decisions, not only in investing, but in all aspects of life. Kids should be prepped not to risk money that they aren't willing to lose, and taught how to forego earnings potential to keep money safe.
• Cash, stocks and bonds. A brief introduction to the asset classes can reinforce the risk/reward lesson. Cash savings deposits are low risk, but offer little in terms of earnings. Government bonds have slightly more risk and offer slightly better earnings. Stocks have more risk and the highest potential for earnings. You should also help your child become familiar with the rights and responsibilities of being a shareholder.
• Market sentiment and share prices. Young investors need to understand that the market collectively puts a value on a share of stock, and that value is the stock's trading price. This shouldn't be a tough lesson. In this Internet age, kids are comfortable with the relationship between popularity and worth-think of all the websites that allow users to rank the best videos, posts, games, etc.

Finding the fun in investing

Take care to frame the investment lesson so that it's interesting (or at least not horribly dull) to your child. Stay away from charts and graphs. Instead, make the learning process more conversational, and geared towards your child's interests. You could talk to your skateboarder about the risks and rewards of trying a frontside 360 without first learning the frontside 180. Or ask your video game fanatic about whether it's better to start with the easy songs in Guitar Hero or jump straight to the expert level. Get them thinking about choices, and the trade-offs associated with them.

When it's time to make investment picks, show your child how to set up a dummy portfolio in Yahoo! Finance. Tell her it's a game, like The Sims and Roller Coaster Tycoon. Have her choose the companies she knows; some good options might be Skechers (NYSE: SKX), Electronic Arts (NASDAQ: ERTS), Six Flags (NYSE: SIX), and Apple (NASDAQ: AAPL). Set up relevant email alerts and notifications-whatever it takes to get her involved. Who knows, with a little encouragement, you might have the next Kevin Roth on your hands.