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Age-Appropriate Investment Strategies for Kids: A Step-by-Step Guide

Updated: Dec 2, 2023

As an educator focused on teaching finance to kids, I've seen firsthand the value of introducing them to the world of investments early on. For parents looking to navigate this journey, you're in the right place. We'll explore age-appropriate strategies to help you in teaching kids about the stock market and more, laying a strong foundation for their financial future.


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Little girl on a bike

If you want a quick refresher on common stock market terms, check out our article "12 Common Stock Market Terms Explained for Kids."

Understanding the Basics of Investment (Ages 5-8)

Simple Concepts for Young Minds

At this age, children are like sponges, eager to absorb new concepts, so it's crucial to start with the basics. Investing can seem complex, but for kids aged 5 to 8, it’s all about making it simple and relatable. Try comparing investing to planting a garden – you plant seeds (invest money), take care of them (monitor investments), and over time, they grow into a thriving garden (returns on investment).

Key Points:

  • Investing Simplified: Use everyday examples, like saving allowance to buy something bigger later.

  • Fun and Learning: Incorporate board games that teach money management, and read storybooks focusing on saving and investing.

Interactive Learning Through Play

For young kids, learning is most effective when it's fun. Consider board games like "The Game of Life" or "Monopoly Junior" that simulate economic principles in an engaging way. Storybooks are also a fantastic medium; for example, "One Cent, Two Cents, Old Cent, New Cent" by Dr. Seuss explains money in a fun and accessible way. These activities lay the groundwork for understanding savings and growth.

Practical Money Management (Ages 9-12)

Building a Financial Foundation

As kids enter their pre-teen years, their understanding of the world, including finance, begins to deepen. This is the perfect time to introduce more structured financial concepts such as budgeting and saving towards specific goals. For instance, if they receive a weekly allowance or birthday money, guide them to set aside a portion for longer-term goals, like a new bicycle or video game. This teaches them the value of delayed gratification and planning.

Key Points:

  • Budgeting Basics: Use simple tools like a budgeting jar or a spreadsheet to track their spending and savings.

  • Goal Setting: Help them set achievable financial goals and develop a plan to reach them.

An Introduction to the Stock Market

The stock market might sound like a grown-up topic, but it can be fascinating and educational for kids. Online simulators like "The Stock Market Game" provide a hands-on experience without real financial risks. Discussing well-known companies that they might be familiar with, like Apple or Disney, can make the concept more tangible. Explain how buying a company's stock means owning a small part of that company, and how stock prices can go up or down based on how well the company is doing.

Check out the article "5 Must-Read Children's Books on Stock Market Investing" for more tips!

Are you working with your kids on investing now, or getting ready to?

  • We're investing now!

  • Learning first, but will start soon!

Dive into Real Investing (Ages 13-16)

Starting with Custodial Accounts

For teenagers, practical experience is key. A custodial account is a great way to offer them real-world experience in investing under parental guidance. This type of account allows them to own stocks or bonds, teaching them about the stock market with actual money, albeit in a controlled environment. It’s a hands-on way to learn about buying and selling stocks, understanding market trends, and the importance of patience in investing.

Key Points:

  • Custodial Accounts: Teach them about different types of custodial accounts and how to manage them.

  • Learning by Doing: Encourage them to research stocks or mutual funds, understanding the factors that influence their performance.

Learning Investment Strategies

This is the age to delve into different investment strategies. Discuss various investment types, such as stocks, bonds, mutual funds, and ETFs. Explain how diversifying their investments can help manage risk. Engage them in role-playing investment scenarios to understand market dynamics better. For example, simulate a situation where one stock drops in value and discuss how it affects their portfolio and what steps they could take next.

Advanced Investment Concepts (Ages 17 and Above)

Risk, Diversification, and the Long Game

Now, it's time to tackle more advanced concepts like risk management and diversification. Discuss the risks associated with different types of investments and the importance of not putting all their funds into one investment (diversification). Use real-world examples to explain market volatility. Introduce them to concepts like retirement savings, explaining the power of compound interest and the benefits of starting to save early.

Key Points:

  • Understanding Risks: Use real-world examples to illustrate market risks and how to manage them.

  • The Power of Diversification: Explain diversification through examples and how it helps in reducing investment risks.

Preparing for the Future

Discussing long-term financial planning, such as retirement savings, is crucial for young adults. Introduce them to Roth IRAs and other tax-advantaged accounts, explaining how these can be beneficial for long-term growth. Highlight the importance of starting early and how even small contributions can grow significantly over time due to compound interest.


We've journeyed through various age-appropriate investment strategies, from simple concepts for young children to more advanced topics for teenagers and young adults. The key takeaway is to build their confidence and knowledge in finance and investing gradually.

For further guidance in teaching kids about the stock market, explore books, websites, and games suitable for each age group. You can read some of our other articles for more ideas, such as our top 5 recommended books for teaching the stock market, and our top 10 games list!

Begin those investment conversations with your kids today. If you've tried any of these strategies, share your experiences and inspire others!


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