Teaching children about investing can set the foundation for a lifetime of financial wisdom.  While the concept might seem complex for young minds, introducing them to the basics of investing can demystify investing and instill a sense of financial responsibility from an early age. Whilst we wouldn’t advocate teaching your toddler about the intricacies of stocks or bond trading we thought we’d explore some tactics you could use with your little ones when it feels (age) appropriate to do so.

Start with the Basics

Begin by explaining what money is and how it can be used—not just for buying things but also for making more money. Use simple terms to describe what investing is: putting money into something now (like a business or a piece of property) with the hope that it will grow over time.

Use Relatable Examples

Children understand the world through stories and examples they can relate to. Explain investing by comparing it to something familiar, like planting a seed and watching it grow. Just as a seed needs water and sunlight to become a plant, money needs to be invested wisely and given time to grow.

Introduce Them to Savings and Investments

A piggy bank is a child’s first savings account. As they grow, introduce the concept of a bank savings account, which can be akin to their piggy bank but with the added benefit of earning interest. Gradually, you can introduce more sophisticated forms of investing, explaining stocks as pieces of a company that people can buy and that the value of these pieces can go up or down based on how well the company is doing.

Play Investment Games

There are many online games and apps designed to teach children about investing in a fun and interactive way. These games simulate real-life investing scenarios in a controlled, risk-free environment, allowing children to understand the consequences of investment decisions without actual financial risk. And, of course, you can use our handy investment calculator, or resources like the journey of a Junior ISA  to see how much a Junior ISA could be worth over time. 

Encourage Questions and Discussion

Children are naturally curious. Encourage them to ask questions about money and investing. Discuss financial news or trends in simple terms to make them aware of the economic world around them.

Lead by Example

Children learn a lot by observation. Let them see you manage your investments, discuss your decisions and thought processes, and explain both your successes and failures. This open dialogue about personal finance can be incredibly educational.

Saving vs. Investing

It’s important to distinguish between saving and investing. While both are essential, investing is about making your money grow, whereas saving is about putting money aside for future use. Teach them that while saving is safe, investing can help their money grow over time but, inherently comes with some risks. 

Teaching children about investing is about laying the groundwork for financial literacy and responsibility. It’s about empowering them with the knowledge to make informed decisions and the wisdom to manage their finances wisely as they grow. While the specifics of investment vehicles like Junior ISAs can be part of the conversation, the focus should be on the broader principles of investing and financial growth. By starting these lessons early (and age appropriately), you can start to prepare your little ones for their financial future.