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Investing for the Future: How Parents Can Teach Their Kids About Long-Term Investments

Hey parents and educators!  Today we’re going to be talking about how parents can help their kids think about long-term investments. As someone passionate about personal finance education, I'm excited to share insights and strategies for parents looking to introduce their children to the world of investing. Remember, it's never too early to start!


Table of Contents


teaching the basics of personal finance to kids

I. Setting the Foundation: Understanding the Basics of Investing and Compound Interest

The first step in teaching kids about long-term investments is to lay the groundwork with some fundamental concepts.

What is Investing?

  • Explain Investments: Start by explaining what stocks, bonds, and mutual funds are. Use simple language and examples.  If you need help check out our article covering the top 12 stock terms kids need to know!

  • Compound Interest: Teach the magic of compound interest and how money can grow over time.  We’ll go into more detail on this in a second.

  • Real-life Examples: Share stories or examples of how investments have grown over years.

Why Compound Interest is the Most Important Concept

Teaching your kids the power of compound interest is the true backbone and powerhouse behind investing.  Here’s the thing, the longer you give your money to grow, the more exponential the growth will be.  

Let’s say we want to have $1 million for retirement at age 65.  If we start when we’re 20, all we need to do is save $115 a month until we turn 65!  Imagine you work for a company that has a 401k match, then all you actually need to save is $58 a month!

Now let’s say we put off investing for retirement until we are age 50.  To achieve the same $1 million result at age 65, we would need to invest $2,595 every month.  Seems a little more difficult right?

This is why we talk about the powers of compound interest so much!  The earlier we can get our kids investing and thinking about the future, the less money they will actually need to do it with!  

Key Points:

  • Investing involves buying assets like stocks or bonds that can grow in value.

  • Compound interest allows your money to grow faster / exponentially over time.

  • Real-life examples help kids understand the impact of investing.

learning about investing at the proper age

II. Age-Appropriate Teaching Techniques

It's important to tailor your approach based on your child's age.

For Younger Children (ages 5-8)

  • Simple Games: Use games that involve saving and growing money.

  • Visual Aids: Charts and graphs can show how investments grow.

For Pre-Teens (ages 9-12)

  • Stock Market Simulations: Introduce basic simulations that mimic the stock market.

  • Risk vs. Reward: Discuss how different investments have different levels of risk and potential rewards.

For Teenagers (ages 13-18)

  • Real Investing: Help them invest small amounts in real stocks.

  • Market Research: Teach them how to research stocks and understand market trends.

Key Points:

  • Use age-appropriate methods to teach kids about investing.

  • Games and visual aids work well for younger kids.

  • Stock simulations and real-life investing can be introduced as kids grow older.

giving kids a real world experience with investing

III. Creating a Hands-On Experience

Practical experience is key in learning about investing.

Setting Up a Custodial Account

  • Custodial Accounts: These accounts allow kids to own stocks under parental supervision.

Using Virtual Investment Platforms

  • Simulations: There are many online platforms where kids can practice investing without real money.

Regular Discussions

  • Market News: Talk about current events in the financial world to spark interest.

Key Points:

  • A custodial account lets kids experience real investing with parental guidance.

  • Virtual platforms provide a risk-free way to learn.

  • Discussing current financial news helps relate learning to the real world.

learning about saving and patience

IV. Teaching Financial Responsibility and Patience

Investing isn't just about making money; it's also about developing good habits.

The Importance of Saving

  • Saving vs. Spending: Emphasize the value of saving over immediate spending.

Success Stories

  • Case Studies: Share stories of successful long-term investors.

The Role of Patience

  • Long-Term Mindset: Teach that investing is a marathon, not a sprint.

Key Points:

  • Saving is a crucial part of investing.

  • Learning about successful investors can be inspiring.

  • Patience and consistency are key in investing.

using technology to help teach investing

V. Integrating Tech and Tools

Technology can make learning about investing more engaging and accessible.

Apps and Websites

  • Tracking Tools: Introduce apps that help track investments and market trends.

Interactive Tools

  • Games and Quizzes: Use interactive tools to make learning fun and effective.

Understanding Complex Information

  • Simplified Data: Tech tools can simplify complex financial data for easier understanding.

Key Points:

  • Tech tools make tracking investments easier and more engaging.

  • Interactive games can be a fun way to learn about investing.

  • Technology helps in breaking down complex financial information.


Teaching your kids about investing is a gift that will serve them for a lifetime. By starting early, using age-appropriate methods, and integrating hands-on experiences, you'll set them on a path to financial literacy and responsibility. Remember, teaching your kids to invest isn't just about money; it's about preparing them for a secure and savvy financial future. And if you're looking for my ideas, check out our article with a deeper dive into teaching kids about investing and the stock market!


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