Why talk to children about investments?

The word "investment" sounds to many parents like something from another world — reserved for the wealthy, bankers, or people with finance degrees. The reality is far more accessible. Investing is essentially a simple decision: instead of spending money today, you let it work for you — and later you'll have more.

Why explain this to children? Because the earlier they understand the power of patience and money growing over time, the better financial decisions they will make as adults. Also because today's children will need to handle retirement savings, mortgages, and investments far sooner than we think.

The basic principle: money can grow

Let's start from the very beginning. If you have €100 and put it in a drawer, in one year you'll still have €100 (minus inflation — but we'll get to that). But if you invest it — say, in an ETF fund tracking the global stock market — you can historically expect an average annual return of around 7–10% (after inflation, roughly 4–7%).

For a child, you might frame it like this: "Imagine your toy collection adds one new figure every year by itself. Without you paying for it. That's how investments work."

What is a stock?

A stock is a small piece of ownership in a company. When you buy a share in Apple, you become a (tiny) co-owner of that enormous company. If the company does well and earns more money, the stock price rises. If it struggles, the price falls.

Example for a child: "Imagine three friends open a lemonade stand together. Each puts in €10 and gets a third of the business. If the stand does well, that third is worth more. A stock is exactly that — a piece of a business."

One key property of stocks: they are volatile. Their price fluctuates — sometimes dramatically. In 2020, stock markets fell by 30% in a few weeks during the COVID crisis. Then they recovered within a year and continued growing. Short-term swings are normal. The long-term trend has historically pointed upward.

What is a bond?

A bond is essentially a loan you give to a company or government. They promise to return your money after a set period and pay you regular interest (a coupon) along the way.

Example for a child: "Your friend borrows €50 from you for a new bicycle. They promise to pay you €2 extra every month, and after a year they'll give back the full €50. You are the lender. They are the borrower. That's exactly how a bond works."

Bonds are generally less risky than stocks but also deliver lower returns. They are suitable for people who prefer stability — for example, those approaching retirement who cannot afford large swings.

What is an ETF?

An ETF (Exchange-Traded Fund) is a "basket" of stocks or bonds that trades on a stock exchange like a single share. Instead of buying stocks in 500 different companies individually, you buy one ETF and automatically own a slice of all 500.

Why is that great for beginners? Because diversification — spreading risk across many different investments — is one of the most important principles of investing. If one company goes bankrupt, your loss is minimal because you hold investments in hundreds of others.

Example for a child: "Imagine that instead of putting all your chips on one card, you put a little on 500 different cards. If one doesn't work out, you're still in the game. That's how an ETF works."

Compound interest — the eighth wonder of the world

Albert Einstein reportedly called compound interest "the eighth wonder of the world." The principle is simple: the returns from an investment are reinvested, so they in turn earn further returns. The effect over time is enormous.

A concrete example:

  • A child (age 10) receives €1,000 from grandparents.
  • Parents invest it in an ETF with an average 7% annual return.
  • In 10 years (age 20) they'll have roughly €1,967.
  • In 20 years (age 30) roughly €3,870.
  • In 40 years (age 50) roughly €14,974 — without adding a single euro more.

That is the power of compound interest. Money works while the child lives their life.

Dollar-cost averaging: invest regularly, not "at the right time"

Many people don't invest because they're waiting for the "right time." Professional investors know this time never arrives — nobody can reliably predict market movements.

The solution? Dollar-cost averaging (DCA) — the strategy of investing a fixed amount at regular intervals regardless of market conditions. If you invest €50 every month, sometimes you'll buy more shares (when they're cheap), sometimes fewer (when they're expensive). Over a long horizon, the fluctuations average out and the result is steady growth.

For parents who want to invest for their children: set up a regular monthly transfer to an ETF fund and forget about it for 15–20 years. It is one of the most effective ways to build wealth.

How to talk about this with children

You don't need to explain the full stock exchange mechanics to children. A few simple concepts are enough:

  • "Money can grow" — the basic principle of investing.
  • "Patience pays off" — the long term is key.
  • "Don't put all your eggs in one basket" — diversification.

The STILL game does exactly this — it explains these principles through game stories and decisions where the child sees in real time how their in-game "investments" grow or fall depending on their choices.

Conclusion: Start simpler than you think

Investing for children doesn't have to be complicated. Open a savings account for the child. Set up a regular monthly transfer to an ETF fund. Talk to your children about what it is and why you're doing it. And let time do the rest of the work.

The most expensive day to start investing was yesterday. The second most expensive is tomorrow. Start today.