How to Teach Your Child About Investing?

My son Rupert has always been very curious about money. He often asks me how people make it and why some are rich while others are poor. I vividly remember when he was 7, his piggy bank filled up, and he asked me what he should do with all the money he had saved.

That’s when I had an idea: “Great! This is the perfect time to teach him about investing!”

But investing is a complex topic, and you can’t teach it to a child in the usual way. You need to make it super simple to understand.

How do you teach children about investing in a memorable way?

First of all, we know putting money in the bank isn’t the best idea because of low interest rates. So, I decided to skip the bank and teach him about investing in stocks, which are much more profitable in the long run.

To make it simple, I explained investing in stocks using a chocolate factory—because Rupert really loves chocolate. And I bet your children do too.

“Rupert, now that your piggy bank is full, it would be very wise to invest that money in stocks and make it grow. Do you know what investing in stocks means?”

“No, I don’t. And how can you make money grow?”

“OK, Rupert, let me explain… Do you like chocolate?”

“Yes, of course, Daddy!”

“And where do they make chocolate?”

“In a chocolate factory!”

“Yes, exactly! So why don’t you draw a chocolate factory, and I’ll explain what stocks are using your drawing.”

A few minutes later, we had Rupert’s chocolate factory:

“Now Rupert, if you buy a stock, you’re basically buying a small piece of that factory. So, investing in stocks means you become an owner of a small part of the factory.”

“Ok, I like that, Daddy! So if I buy a stock, this piece of the factory becomes mine?”

“Yes, that’s right, Rupert, you’ve got it! And now comes the most important part… whenever someone buys a chocolate bar in a store, you’ll receive a small amount of money because you own a part of the factory!”

“Wow, that’s great! So Daddy, when someone buys chocolate, I’ll get some money?”

“Yes, it’s pretty amazing. It won’t be a lot, because you own just a tiny piece of the factory, but over time, you can accumulate a lot of money this way.”

“And now I have an important question for you, Rupert: would you rather buy a chocolate bar or a stock in the chocolate factory?”

“I think I’d buy the stock. If I buy a stock now, I can have more chocolate bars later.”

“You got it, Rupert! I’m so proud of you. Most people never understand this concept.”

Now you do it!

Now is the perfect time to have a conversation with your children. Read this article a few times and get ready.

Teaching them about investing in stocks will not only help them win the financial game of life but also instill the importance of delayed gratification—an essential skill for success.