As parents, we want to give our kids every opportunity to succeed, including setting them up for a strong financial future. Investing for your kids at a young age is one of the smartest ways to achieve this. Whether it’s saving for college, teaching them about money, or building a long-term financial safety net, getting started early can accelerate their path to financial success.

Why Start Investing for Your Kids Early?

When it comes to building wealth, time is your best friend. The earlier you begin investing, the more opportunities your money has to grow through the power of compound interest. Starting early also positions your kids to take advantage of future market trends, potentially decades in advance, which can lead to substantial returns. Additionally, time allows their investments to weather inevitable market pullbacks or downturns, benefiting from the overall long-term upward trajectory of the market.

Let’s consider an example using the average annual return of the S&P 500 over the past 20 years, which has been about 10%. If you had invested $10,000 in the S&P 500 two decades ago and left it untouched—like a savings account—that investment would have grown to approximately $73,000 today. Not bad, and definitely more than I had when I was 18 or 20 years old.

Now, let’s take it a step further. Imagine you spotted a high-growth opportunity like Netflix at the time and invested another $10,000. That same investment would now be worth around $5.4 million today.

Let that sink in. Imagine if your parents had the foresight to make these kinds of investments. How different would your life look today? For many of us who didn’t grow up with parents who had the knowledge or resources to take advantage of these opportunities, we now have the chance to rewrite the narrative for our kids, their kids, and generations to come.

They don’t have to get it out of the mud, they can get it out of the trust.

How to Get Your Kids Interested in Investing

We all want to fast-track our kids’ financial futures, but it’s not just about growing their money. It’s equally important to help them appreciate what they have and understand the value of investing. After all, handing over $5.4 million to an 18-year-old without a solid foundation is a recipe for disaster. It’s the lottery winner who goes broke in five years.

The first step in getting your kids to value investing is teaching them about it—how money works, how it’s earned, and how it grows. Personally, I want my kids to understand and appreciate what it takes to build wealth, while also realizing that money isn’t everything. It’s a tool, not the goal. Money exists to help them live life on their own terms.

Below are a few ways you can introduce your kids to investing and start building strong financial habits:

Start with Companies They Know

Kids are much more likely to get excited about investing when they can relate to it. Show them how they can own a piece of the companies they love, like Disney.

For example, I was recently talking to my four-year-old daughter about what she planned to do with the money she receives from her grandmother for Christmas. She told me she wanted to buy another dollhouse. I asked her, “What if you invested the money instead and purchased Disney stock? Then you could own all those characters you love, and maybe turn that $100 into $200—or more—over time.”

That simple conversation sparked her interest. She quickly grasped the concepts of delayed gratification and compound interest without a complicated explanation. Now, instead of buying another dollhouse, she’s ready to invest in Disney stock this Christmas.

Once you help your kids invest, make it a fun and educational experience. Monitor their investments with them, show them how their money has grown (or decreased), and use it as an opportunity to teach them valuable lessons about patience, risk, and rewards. It’s not just about building their portfolio—it’s about building their understanding of money and its potential.

Choose Beginner-Friendly Investments

Outside of individual companies they know, ETFs (exchange-traded funds) and index funds are another fantastic way to get your kids excited about investing. These funds allow them to own small pieces of multiple companies in one simple investment, which can be both fun and easy to understand.

For example, you can explain to them: “If you want to own multiple toy or robotics companies instead of just one, you can invest in an ETF like XLK. This gives you a bundle of companies that make cool items like Mommy’s iPad, Daddy’s PC, and other gadgets we use every day.” By framing it in terms of products they’re familiar with, you make it relatable and engaging.

Take it a step further by showing them some of the companies these ETFs hold and mentioning the products they make. For instance:

• Apple (AAPL): The iPhones and iPads they see daily.
• Microsoft (MSFT): Consoles like the Xbox they play.
• Google (GOOGL): The platform they use to watch YouTube videos.

This approach helps them see that these aren’t just abstract investments—they’re tied to real-world products they interact with regularly.

Encourage a Long-Term Mindset

Of course, you’ll need to tailor each lesson to your child’s age and experience, but the most important thing is to teach them the value of patience and long-term thinking. Explain that investing isn’t about quick wins—it’s about building wealth over time.

As I mentioned earlier, my four-year-old quickly grasped and got excited about the concept of delayed gratification. Sharing examples of how small investments can grow over time can help your kids see the bigger picture and understand the long-term benefits of investing.

Final Thoughts

Investing for your kids is one of the most impactful ways to set them up for a bright financial future. By teaching them valuable lessons along the way, they’ll develop a deeper understanding and appreciation for money and how it works.

In our next “Investing for Kids” article, we’ll dive into specific accounts you can set up to help manage these funds. If you’re ready to learn how to invest in the stock market and fast-track your child’s financial future, subscribe below to download my free ebook, “The Ultimate Beginner’s Guide to Buying Your First Stock.”