10 Investment Lessons to Teach Your Kids

10 Investment Lessons to Teach Your Kids
Written by Oana Schneider

As a parent, you’d expect subjects like history, mathematics and science to be taught to your kids in school. The one subject which should actually be taught in school but is unfortunately not offered as a formal class is personal finance management. Surprisingly enough, even children as young as three years old can already grasp the concept of how to manage their funds – but it is something that you should teach them yourself at home.

Here, we will take a look at how you can teach kids about money depending on their age, and which top ten investment lessons you can impart to your children. 

Start ‘Em Young: Teaching Kids about Money by Age

Before counting down the top ten investment lessons that you can teach your kids, let us first take a look at how you can develop their money management skills, according to age:

3 to 5 years old

Financial experts say that children as young as three years old can already grasp money-related concepts like saving and spending. The earlier you start teaching your kids about money, they deeper their foundational skills will be – something that they can use once they grow old. For kids aged three to five, the lesson that you should be highlighting is delayed gratification. Tell them that they would have to buy something they want, especially if it’s not necessarily a need.

When you’re buying a gift for a niece’s birthday, for example, and you need to bring your daughter to the store with you – tell her that your budget is only for the gift you’re going to buy. Just because you’re entering a store does not mean that your daughter will get something, especially if it is way beyond your budget. This is also the age when you can make money jars labelled Saving, Spending and Sharing.

If your daughter’s grandmother gives her money to buy candy, teach her to put it in the Saving jar instead – and when there are enough funds in there, she can actually use it to buy a toy.

6 to 10 years old

Making intelligent choices about how to spend money is the lesson that you should teach your kids at this age. Highlight the importance of being wise in making money-related decisions because once the dollars are spent on something, they’re gone.

When going grocery shopping with your son, explain to him why you’re choosing brand X instead of brand Y – because brand Y costs a lot less and the taste is pretty much the same. Or, you can give daughter $5 for two days’ worth of snacks at school so that she can experience how it is to handle her own money.

11 to 13 years old

At ages 11 to 13, kids can already grasp concepts like compound interest and understand the importance of setting long-term financial goals. For this, you can use apps that teach kids how to calculate compound interest rates, how to save a certain amount within a specific time frame, how to budget, etc.

14 to 18 years old

Your kids are almost off to college, and these are the most challenging years that you will all have financially. The best way for you to cope as a parent is to be with your child every step of the way. Make your kid realize that no matter how high tuition fees are at a college or university, the long-term results of the investment will be well worth it in the end.

18 years old and up

This age is all about college, and as a parent, you should not necessarily be sacrificing your retirement fund just to get your son or daughter the right education. There are many financial options available out there and if you got a good head start at saving up for college when your kid was just a few years old, then it should be easy for you to look for supplemental funds.

Top 10 Investment Lessons to Teach Kids

Next, here are the top ten investment lessons that parents can teach their kids:

1. The earlier your start investing, the better.

This is a lesson that you can impart to your kids, and live out as a rule for yourself. The earlier you start, investing, the better. With investment instruments that have compound interest, for example, the amount of time that you are putting in towards the investment will affect your return of investment.

You can start by getting your kids to put coins in money jars as early as three years old. Tweens and teens should be encouraged to save money to buy something they want, especially if it’s a luxury that is way out of the household budget. Teach them about delayed gratification and the importance of working hard for whatever it is that they want to achieve.

2. Investing is a way of getting your money to work for you.

Whether it’s a five or fifteen-year-old kid that you have, the number one rule that you need to teach them about money is that investing is a way to get money to work for them.

3. It’s important to prioritize.

If you’re a couple who is just starting a family, you should have no problems at all teaching your kids about the value of money through prioritization. Tell them that it is more important, right now, for you to be able to afford paying for a roof over your heads than buying your kid the latest gaming console or mobile phone. They should easily get the point of the lesson.

4. It’s important to build credit.

Your freshman kid can get pre-approved credit cards and give in to the temptation of spending money that they haven’t even earned yet. Before your son or daughter heads over to college, make sure to highlight the importance of building credit and managing debt. They would have a hard enough time as it is to pay for student loans later on, so unnecessary credit card spending should be a big no-no.

5. It’s important to live within your means.

For this, budgeting and prioritizing the things that need to be spent on are the lessons that you should be able to teach your kids. Use your life in the house as an example. Give your kid a glimpse at what the household budget looks like and help him or her create the same budget for a week’s worth of allowance. If the money does not allow for luxury items to be bought, tell your kid that there’s a need to work hard to get the extra things in life.

6. You should invest for the future.

Kids might not necessarily be thinking about retirement during their teenage years, but they will definitely look as far ahead as going to college or buying a house and a car. In order to achieve these immediate goals, they need to invest for the future – and this is where the money management skills will come in.

7. You should invest a small amount of money.

There are conservative investors and there are investors who are willing to take more risks. This is a trait that you can discover in older kids who can already understand the concept of risks when it comes to investing money. A good rule of thumb to follow is to not let them invest an amount which is more than what they’re comfortable with – a rule that you can also follow suit as a parent.

8. There’s magic in compound interest.

Next, why not explain to your kids the magic of compound interest? With a $10 bill that’s invested in a compound interest account, the amount will double in about every ten years. Essentially, saving over time is productive so the longer your money stays in a compound interest investment, the more it will earn.

9. Learn about the concept of college and retirement accounts.

Again, young kids may not necessarily think way in advance about retirement – but there will always be their college years to deal with. Is there a specific school that your kid has in mind for college?

If the tuition costs there are extremely high and you do not have that much college fund investments to start with, what’s the backup plan? Remind yourself that the same thing holds true for your retirement funds. The earlier you start saving up for it, the better off you will be financially during your golden years.

10. You should learn how to comparison shop.

Finally, being wise with spending is also a part of investing because this is where the money goes. When going grocery shopping, teach your kids how to look for lower-priced brands with almost the same quality as a pricier brand. When hiring a service, get different price quotations first and comparison shop. The same thing holds true when shopping for things online.

By teaching your kids these ten investment and money management lessons, they should be able to handle their own money well in the future.

About the author

Oana Schneider

Oana Schneider is a published author located in Chicago, Illinois, who currently works for as a communication specialist and blog editor. She writes about lifestyle, family budget, has a degree in Communications and advocates for women’s rights. Her future plans include getting a Labrador and losing a few pounds.


  • This is a great article and I do believe very much that its great to start teaching kids at a young age. Whenever my parents gave us money I did occasionally spend it but I also did try to save. As I got older early teens I was more on the bandwagon with saving everything I got money wise. It taught me to save as an adult as well.

    • Absolutely. I think it’s a great thing to invest that way and you gave such a good example about your parents giving you money and you occasionally spent it, it’s a way that teaches discipline.

  • College is not the answer for everyone!!! People, please lo I around you and see all the young adults 22-35 with college degrees who have never landed a job in the field of their degree, are working very low wage jobs, trying to survive and pay off loans. Look at all the people who wish they could give their degree back for a refund because it cost them a fortune and now they are worse off for it. Please don’t pressure your kids into going to college. If they have other interests that don’t require a degree, chances are college will be a big waste of money or they will work a miserable job for the rest of their lives just to use the degree they were talked into getting.

    • You’re definitely right about college not always being the answer. The education system, or at least how it’s financed, is completely broken in America. All of these teenagers are raised to think that they have to go to college, and then they get smacked in the face by reality after they can’t find a job with a $50,000 degree.

      • You’re absolutely right. If they would have chosen employment from the time they finished school, and someone else chosen education, the person in education with a student loan has debt and is a slave to it and the one who finished school and chose employment is rich because he has enough money to buy a house or open up a business.

    • This is exactly the reason why education needs to be subsidized. Not all graduates land plum jobs and the burden of paying huge tuition fee debt becomes an onerous task. The only way to stamp out unemployment and pink slips is to encourage venture capitalism. Though, this may not seem related to article, but I just would like to convey the fact that earning a college degree should not be a curse.

  • I believe that teaching kids the value of money can start at a very young age. The article mentions to start at age three and I think that is a fair age to teach them about savings and earning money. Having your kids do simple things around the house to earn some change will teach them a valuable lesson. I have some friends who will buy their kids anything they see at the store if their kid asks for it. I feel as though my five year old has to earn the money to buy that special item, or ask for it for their birthday. I am in luck because my daughter loves the dollar tree, where everything is $1. It doesn’t take her too long to save up a dollar, so she doesn’t lose interest. When she gets to $1 she will ask if I can take her to the store to pick out something special. At her age it is hard to figure out which toy she has enough money for. At this store where everything is the same price, I don’t have to worry about that. It also teaches a valuable lesson regarding math as well.

  • Some great information here, Oana. The fact is that so many kids turn into adults without any knowledge of investments, and then they wind up fearing them like they’re a plague. You can safely invest your money in a savings account, and you can even see incredible results by investing in stocks or bonds. Far too many people think they’ll only lose money through these avenues, and that’s a shame.

  • I personally think every child should have a piggy bank that they cannot take the plug out of. This is the first step to mindful saving. Its a simple way to remind children that they don’t have to spend every cent they get or find. They should save it for a rainy day.

  • Very nice article! If everyone inculcates the habit of saving money right from childhood, the recession would not have been a reality. This blog does a great service to the society as the “Live life kingsize” attitude, has drained so much of resources over time. Giving your children 5 dollars every couple of days and letting them manage their finances is a good idea. It lets them realize the value of money and organize their expenses within their budget.

  • You can’t start early enough with teaching these kids about handling money. We are living in a more commercial society. This basically means that everything is becoming more and more about the money. Money management can’t start early enough as far as I can see.

  • Children have grown and left home to start anew with their careers. Our younger children are still at home. The two youngest ones have bank accounts, saving their fortnightly allowances and little job earnings. It seems that college is still too “far away” in the future think about. But you are right, it’s the here and now that we think abut these investment plans. Thank you!

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