How To Teach Kids About Investing


May 3, 2019

Even to adults with years of experience making and spending money under our belts, investing can be intimidating. The idea of introducing investing to our kids? Daunting.

But if you want your kids to make the most of the money they earn down the line, it’s essential to start teaching them how to literally turn their money into more money: investing. Think about it: wealthy parents have likely made at least part of their fortune from investing. And, they probably make sure to teach their kids how to do the same. Regardless of if you’ve dabbled in much investing yourself, this skill will be valuable to your kids’ lives. After all, you don’t have to have an overflowing bank account to start investing something. And if you don’t invest anything at all, your savings won’t keep up with inflation. That means that if you don’t put any money into the market, you’ll actually lose out in the long run.

Building blocks of investing can be taught from preschool. At its core, investing is about delayed gratification, patience, and long-term thinking, something that even little kids can grasp. Then, as your kid grows up, use tangible lessons to introduce more concrete concepts and skills. It’s up to you to gauge exactly what types of lessons your child is ready for. Here are some ideas to get you started:

Use a game to teach delayed gratification

Money might be too complicated at a young age, so start with a more visual, tangible example. Plant seeds and have your child water them every day, then see the resultant plants grow bigger and bigger. Or stick with the classic: offer to give your kid one candy right now, or wait ten minutes—but get two candies. Some videogames even introduce delayed gratification: stocking up on supplies, waiting to save up “power,” or a harvesting or incubation period.

Dust off that clear piggy bank

What makes investing so worthwhile is interest. To demonstrate interest to a young kid, add an extra coin to their transparent piggy bank at the end of every week they contribute a coin themselves.

Use a relatable example to explain stocks

This could be a part of his/her favorite company (like Disney or McDonald’s). Tell them that owning a stock means owning a small part of the company. You can play a make believe game where they invest a certain amount in one company’s stock. Then, they track their investment according to the actual stock price, and see how they do. It can be a fun competition between siblings! You can even make this game real by giving them a small amount to actually invest.

Buy your child a lottery ticket—with a twist

Even though the stock market may seem random, it’s proven to grow over time. On the other hand, you’re not likely to win back, let alone earn more, than what you spent on a lottery ticket. Make this lesson concrete using numbers—how much a dollar invested will grow over one, ten, fifty years—versus the chance that a single lottery ticket will win big. This lesson can help introduce the concept of compound interest.

Explore different kinds of investing, not just stocks

Having a diverse investment portfolio is important, and the options extend far beyond buying stock in one company. From index funds to real estate to startups, there are lots of possibilities. When having these discussions, be sure to emphasize the risk inherent in any investment, and how that varies between types of investments.

Explain that investing helps beat inflation

In the long run, inflation means you’ll “lose” money in purchasing power over time. You can go back to a jar of coins for this—taking away a few coins each day for a week to show how purchasing power decreases over time. At the end of the week, count the money, and show you can’t buy as much as you could at the beginning of the week.


When your kid gets their first summer job, match the sum they set aside for savings in an investment account. This simulates a 401(k) match, and shows them the impact of investing faster than the stock market can.

It’s especially important to teach girls about investing. Adult women report lower levels of confidence in their investing abilities—and lower confidence in the performance of the stock market—than men. This confidence gap begins in childhood. On the other hand, men are more prone to overconfidence and riskier choices when it comes to investing. So, with the right skills and knowledge, women are likely to make healthy investments overall.

While it may be tempting to hand your child a lump sum and teach them to invest it in the actual stock market, it’s important to have controlled experiments and micro-lessons at first, since the market can go up and down. If your kid’s first experience is losing money, they might come to the wrong conclusions. So, be sure to start teaching your kids about investing from a young age  to steer them on track from the get go. If your kids are a bit older and if you missed that early childhood train, know that it’s never too late to begin.

Article by Katie Simon

Katie Simon Katie Simon is a writer whose work has appeared in The New York Times, Business Insider, The Washington Post, BuzzFeed, and elsewhere. She earned a BA in creative writing and marketing at New York University and an MA in nonfiction writing at University of East Anglia in England. She is from Boston, MA.

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