An Idea That Will Teach Kids About Money & Investing

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.

Trent Hamm
Trent Hamm
Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

Loading Disqus Comments ...