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Educational Resource: Investing For Kids!

Kids making moneyIf you have ever heard your parents talking about money, you might have a few questions. How can my money make money? How can I set goals? Does it cost money to invest? Are there any reasons I shouldn’t start saving now? Hopefully you can have all of your questions answered here and you should feel confident joining in the conversation next time!

How can the money you have, make you money later in the future? When you have an account with a bank or savings business, that place has an interest in keeping your money. They cannot keep their business growing unless they have money to use. As a customer to the bank you are allowing them to use your money, on the agreement that they will pay you back whenever you ask for it. For this service the bank offers a small percentile payment of interest, with higher rates for established accounts and those with a lot of money. This means the longer you have your money in the bank, the more interest you will make. So, your money will make you money if you invest it correctly.

Setting goals for investing is a lot of fun. Not only are you preparing yourself for the future, you will learn all about the benefits of saving first hand. Try to set realistic goals, meaning do not think you can save a million dollars if you only put in a dollar a month. Think small to start with and when you get better at savings and see your money grow, you will be more excited about saving more. If you get an allowance start with 10% in savings, then to 20% and so on. You will see how simple it is to really save for important big things. For example, if you get $10 every week from your parents for chores, see how much you can save. Start with just a dollar in savings every week, and then go to two dollars, then to five. You will still have spending money and the small savings will equal a large sum later.

English: ceramic piggy bank
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If you start out with a large lump sum, your money will increase faster. As you earn your percentage interest on the total amount of money, it is best to have a large number for as long as possible. This means if in the entire year you put in $100, it is better to invest in January with all the money, allowing it to develop interest. If you chose to do a monthly investment of $10, you would not receive as much money in the long run.

There are many ways you can save money. Some banks allow free savings to kids who want to start early. Although they do not cost anything or are low-cost, banks offer a very low percentage of interest. Mutual funds vary in cost, but are usually paid according the percentage of investment. They are a great way for kids to invest, as they offer a higher percentage rate in the long run. Mutual funds can also cost a lot for transactions, for when you want to move money, invest more or take out money. Because of this, mutual funds should be used for long-term investments, like your college education or a future home. Stocks in the stock market can be used long or short-term. This form of investment can vary on cost, depending on the company and how many shares you want to buy. If you want to learn about the stock market, try out investing games where you can practice using real stocks with fake money. Stock market investing is the most risky, but it has the most potential for profit.

Some words are used a lot in savings and stocks. Asset is commonly used to explain value; they can be both money and property. Capital is how much money or property you have, or the combination of all of your assets. Credit, like a credit card is how much money that is loaned. So, if you have credit card and use it for a purchase, you are using credit. Your credit rating can determine what your credit allowance can be. Deposit means to pay into something, meaning money into a bank or an investment in the stock market. Withdrawal means to take money out, the opposite of a deposit. Your parents may have a monthly payment called a mortgage. If they have bought the house through a bank, they may have borrowed or used credit to buy the house. So, every month they have to pay the bank back in payments called a mortgage. Profit means that once a house, stock or fund has been cashed out or sold, money was made from it. If you put in $10 to a stock and after time the stock matured to $12, if you sold you would have a two dollar profit. If the investment loses money, it would be considered a loss.

It is important to start saving as soon as possible, as the longer your money has to mature the more likely you will make a profit. Try to make reasonable goals and set money aside every month toward big expenses like your education or home. Savings and stocks can be a lot of fun. Try out the following games on investing and money to learn more!

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Greg Jensen


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