Four ways to get children interested in saving and investing

Whether you are a parent, grandparent, aunt, uncle or a close friend to someone who is a mum or dad, there are many ways you can get children interested in investing.

The more money built up for a child in their early years, the easier it should be financially for them to deal with some of life’s big milestones when they become an adult.

Whether that is avoiding large debts from a university education, not running out of money two weeks before the next monthly pay packet or being able to get on the property ladder. The sooner a financial plan is actioned, the better.

As much as some parents would love to see their child manage their own investment portfolio, in reality adults might need to act as a mentor up to the age of 18, or even older.

Fans of Karate Kid and Cobra Kai should appreciate it’s more like Mr Miyagi subtly training the child to understand core skills than letting them run wild with a fistful of cash. As Mr Miyagi said, ‘First learn stand, then learn fly.’

Here are four ways to get children interested in saving and investing and to help them get started on what is hopefully a fruitful journey.”

1. ‘Spend some, save some’

There are two ways a child typically receives a regular stream of cash: either through pocket money or an allowance. If mum and dad are forking out cash on a regular basis, they might want to have a say in how it is used.

Wise parents should encourage the child to adopt the mantra of ‘spend some, save some’. That’s a fair way to let the child deploy some of the cash while also subtly teaching them the importance of putting money away for another day.

Getting into the habit of making things last is the cornerstone of good money management.”

2. Teach children that patience can bring rewards

Someone aged eight or over might be familiar with the basics of how money works, where it comes from and why someone cannot buy everything they always want. If they don’t, it is essential that parents explain these factors.

This would be a good point to expand on the core concept of interest on savings, namely being paid by the bank to let your money sit untouched. It’s the precursor to understanding how dividends work for investments.

Set the child a challenge and incentivise them with a reward if the target is met. For example, if a child had a bag of sweets at the start of their half-term holiday and ate the lot in one go, they might regret their decision if they wanted more sweets later that week. Had they kept some of those sweets back, they could have paced themselves and had a little treat each day throughout the holiday.

Next time they are on school holiday, remind them what happened last time and suggest they could have an extra treat on the final day if they manage to ration sweets throughout the holiday.

The extra treat plays the role of interest on savings or dividends on investments. The exercise combines the concepts of restraint and receiving a reward for behaving in a certain way.

The child may not realise it immediately, but that exercise also lays the groundwork for developing good habits linked to money management such as not blowing all their cash on pay day when they’re older, and the importance of being patient.

When they eventually open an investment account, these habits will hopefully have been engrained in their behaviour and become second nature.”

3. Put aside some present money into a Junior ISA

Encourage the child to put some of the money they get from birthday or Christmas presents into a Junior ISA.

Realistically, most children would baulk at this idea, preferring to spend the cash on something they want, yet offering to top it up by a certain amount if they put it in a Junior ISA could make all the difference.

One alternative is for a parent to consider imposing a rule that one third of any birthday or Christmas money must go into an ISA. Build the habit from an early age and the child might see it as a normal thing to do, rather than pushing back on it.”

4. Get the child involved: let them pick some investments

Children are more likely to be engaged if you get them involved in doing something rather than being the nagging parent or coming across like a teacher. If you really want your child to develop a taste for investing and adhere to the motto ‘good habits start young’, let them pick some of the stocks or funds for their Junior ISA.

This should make them more enthusiastic about how their money could grow in value and feel as if they are in charge.

A good starting point is to get them to make a list of their favourite activities or things they couldn’t live without.

For someone of primary school age, it might be the companies which make their toys, favourite meals or drinks, or the creators of their cherished games.

Secondary school children might list the company which makes their mobile phone, the manufacturer of sporting equipment they use in the park, the fashion sellers they love to frequent or the streaming platforms they use.

The child might be more willing to put some of their money into certain companies, or funds that invest in them, if they are familiar with their products and services, and you explain that they could potentially make money if these companies do well.”

Examples of companies and funds children may be able to relate to:

Phones: Apple is likely to be a phone brand many children aspire to own, with the iPhone often considered to be a must-have product. Apple’s shares trade on the US stock market and can easily be bought by a UK investor and held in a Junior ISA.

Music and film streaming: Teens and pre-teens have a ferocious appetite for consuming content and they are the digital generation.

Spotify’s shares trade on the US stock market and can be included in a Junior ISA. It is one of the biggest music streaming platforms and makes money by charging users a subscription fee or carrying third party advertising.

There are broader choices from an investment perspective for film and TV as you’ll find the parent companies behind such platforms as Amazon Prime, Apple TV, Disney, Netflix and Paramount Plus are all on the US stock market.

Toys: Lego is an obvious choice for a child looking to invest in their favourite toy manufacturer but sadly this company is privately owned and you cannot buy its shares. Instead, choices of listed companies relevant to this theme include toy workshop operator Build a Bear; Hasbro, which owns Nerf and Peppa Pig; and Barbie and Hot Wheels owner Mattel.

Social media: Social media is a big part of life for many children. TikTok is owned by Chinese group ByteDance and, while you cannot buy its shares directly, various investment trusts and funds do have a stake in this company, including UK-listed Scottish Mortgage.

US-listed Meta owns WhatsApp, Instagram and Facebook – the first two names are likely to have considerable appeal to teenagers. Snap is the other ‘biggy’ in the social media world with oodles of children using its Snapchat app. Its shares also trade on the US stock market.

Gaming: Whether your child likes platform games, shoot ‘em ups, racing or virtual worlds, there is a good chance all of these gaming genres are represented by the companies in the VanEck Vectors Video Gaming and eSports ETF.

Big holdings include Nintendo, which is the brains behind the Mario Bros games and the Switch console; Take-Two, whose franchises include Grand Theft Auto; and Roblox, a favourite with the pre-teens market.

Food and clothing: Imagine putting food, drink, clothing and other goods in a shopping basket and being able to tell children they’re invested in those brands.

While your child is unlikely to be familiar with Associated British Foods, they could be excited to know it might have provided the clothes on their back, the toast at the breakfast table and the sugar in your cuppa. Investing in the company provides exposure to the retail, food and agriculture industries, including fashion and makeup outlet Primark, which is hugely popular with children of all ages.

Or a fund like iShares MSCI World Consumer Staples Sector ESG ETF includes names such as fizzy drink maker Coca-Cola; Unilever, whose brands include Magnum ice cream, Hellmann’s mayonnaise and Comfort fabric conditioner; baked beans-to-Philadelphia spread maker Kraft-Heinz; and US grocery giants Costco and Kroger.

There are quite a few funds and ETFs offering exposure to consumer staples but it’s worth looking to see what’s under the bonnet as many include items a parent would not want their children exposed to, such as companies that make cigarettes and vapes. The iShares MSCI World Consumer Staples Sector screens out companies involved in guns and tobacco.