Updated on 09.15.14

An Idea That Will Teach Kids About Money & Investing

Trent Hamm

I recently was chatting with a fellow “new” parent about ways that we could teach our kids about money. She related to me an interesting tale that I thought I’d share with all of you.

On the day her husband was born, his father put $600 into a mutual fund (the exact investment was unimportant, but it was something fairly high earning). The father did nothing with the money for ten years; he just watched it slowly build up over time.

Then, on his son’s 10th birthday, the man gave his son 1/6th of the value of the fund, saying “This is the product of investing $100 on the day you were born and doing nothing else. Money makes money. Never forget it.” Her husband thought it was about $300; he used it to buy video games.

On his son’s fifteenth birthday, the father repeated the gift, giving 1/5th of the fund to his son, and then on his eighteenth birthday with 1/4th of the fund, then 1/3rd of it on the 21st birthday. Each time the gift was given with the same message.

The man in question just had his 28th birthday, and his father sent him a birthday card with a check in it for just under $3,000 with that exact same note attached.

Even after all this, $100 of the original investment, plus more than 28 years of growth remains in that fund. She suspected that it would be given to her husband on some future birthday, or in the event of his father’s death. Either way, the point had been made, and both she and her husband were very astute savers.

When I heard this story, I couldn’t help but think that it was a brilliant idea for regularly reminding your child of how important investing can be. The timing of the payouts is brilliant; not too close together, and matching various points of maturity in a young person’s life. The amounts were also impressive, particularly the later amounts as the investment continues to grow.

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  1. I hear you and am already taking care of business ;)

  2. Adeline says:

    This is a great idea, but other than money, throwing a birthday party once a while could also keep good memory of his Birthday.

  3. Thanks, you just answered one of my questions with something that’s a variation (and a better one) of my own plan. I think this is exactly what I’m going to do.

  4. Pingback: Monday Morning Random Thoughts | Lazy Man and Money
  5. Andromeda says:

    The single most valuable thing my parents ever did to teach me about money was when my mom showed me her retirement account statements when I was a teenager. They had all these cool graphs showing what she actually had, and how it had developed, and what the same amount of money invested at different ages would have resulted in now. (And, in particular, the effect of some bad decisions she’d made when younger was wildly apparent — I could tell that she wouldn’t be able to afford to retire if she weren’t married to my dad.) The magic of compound interest burned itself into my eyeballs and I swore then and there I was starting to save for retirement in my twenties. Didn’t get as much done in my early twenties as I would have liked, but did start saving, and here I am 28 with a nontrivial account built up. I may have to start putting a lot less into retirement with a baby on the way and college to think about…but while I’m saving for college in my 30s, at least compound interest will be doing its magical thing.

  6. Doug says:

    Umm how did the $600 suddenly turn to $100? Did the father lie to make the investment’s yield seem more significant to the son?

    “his father put $600 into a mutual fund”…

    “on his son’s 10th b-day…gave his son 1/6th…, saying “This is the product of investing $100 on the day you were born and doing nothing else”

    If the man was so wise to invest in that manner, he sure didn’t teach his son very well to just waste it on $300 in video games for his 10th birthday. Financial wisdom doesn’t go well with wasteful extravagent spending.

  7. Rob says:


    1/6th of 600 is 100.
    While he put all 600 into the fund – at each birthday he took out the equivalent of $100 invested.

  8. alsowhitesheep says:

    would love to do this for a nephew. any advice on how to go about ‘in custody’ accounts when you aren’t the parent?


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