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  • Writer's pictureDr. Disha

Teaching Kids To Invest

I knew it was going to be a difficult morning when my 5-year-old came down to the living room thrashing and whining.  I took a deep breath, braced myself for the meltdown, and asked, “What’s going on buddy?”

“You didn’t give me new chores!” he exclaims. 

“Um, What?”

“You didn’t write new chores for me to do on my board.”

Ha!  I laughed, “Oh, wow.   

Ok sweetie sure I can give you some chores.”  *Inner high five- totally winning momming.*

But, he’s incensed.  He continues.

“You said you would so I could earn money and invest it!” he exclaimed.

Ohhh he’s concerned about his investment account.  Makes complete sense.


Seriously, though, this is real life.  How the heck did we get here?

How We Started Teaching Our Kids About Investing

We started with the traditional way- a piggy bank.

The boys got a piggy bank each for Christmas a couple of years ago.  That’s where they keep all their found and earned money. 

Before we go to the store (which is rare these days during COVID), we count the money they have in the piggy bank. 

If they want to buy a toy, I ask them if they have enough money in their piggy bank.  If they don’t, then no dice.  If they do, the choice is theirs.  

To help my kids learn about the value of money, I decided to pay them for doing chores. 

This is especially helpful this year since we can’t hire a cleaner to clean the house due to COVID exposure concerns.  So, I decided to give the kids $1 per chore done around the house.  

Since they are only 3 and 5 years old, their chores largely consist of picking up their toys, helping dust or wipe down surfaces, brushing the dogs, and making their beds.  

They are still at the age where they love helping out, so they really get a kick out of it.  

How I Explained Investing to Toddlers

One day, he was counting his piggy bank money when my 5-year-old asked me- “Mommy, how can I make more money?”

I was about to give him the same line that was given to me- work hard, study hard, get a job and they’ll pay you.  But, I know better now.  That’s not the only way to make money.   I thought he was a bit young for it, but he’s a smart kid- I decided to try explaining the alternatives.

“Well, you can work and do more chores OR you can invest the money you have and other people can make money for you.”

He gave me an inquisitive look.  I had his attention.  “How is that?” he asked.

I replied, “Well there are a lot of companies out there that are working really hard- you know like Disney and Walmart and Target- the places we go to.  And, they offer a way for us to become part-owners of them by buying their stocks, so we can get a share of the money that they make in the future.”  

“But, how do I buy stocks, Mommy?” he asked.

Perfect question!  I was probably in the middle of doing something but I dropped it and jumped on the chance to teach my baby.

His First Investment Account

We hopped on the computer together and started him a UTMA account at Acorns.  I love the user-friendly interface at Acorns.   Plus, I’ve been meaning to try it out since I’ve been writing for Grow= Acorns + CNBC.

We worked through the first few demographic screens quickly.  Within 5 minutes, my 5-year-old had handed over $10 dollars to put in his investment account.  Easy peasy.

Investment options within Acorns are basic- it asks you how aggressive you want to be and the the corresponding ratio of ETF’s, kind of like a target date fund.   We chose the most aggressive option.  He’s five- he has plenty of time to regain any losses if the market tanks.

So, Acorns has him in 55% Vanguard S&P ETF VOO, 10% iShares Core S&P Mid- Cap ETF (IJH), 5% iShares Core S&P small-cap ETF (IJR), and 30% iShares Core MSCI Total International Stock ETF (IXUS).  Within the breakdown of his holdings, my little guy was able to see that he now owns a little bit of Apple, Amazon, Facebook, Google, Alibaba, Samsung, and more. 

Acorns has a nice little interactive compound interest graph as well that clearly projects for him that if he continued to invest $10 per week, he could have over a thousand dollars by age 6, or over $15,000 by age 21 or $45,000 by age 35! 

I explained to him that with that money, he could buy himself a car or take a year to travel at age 21.  Or, he could continue to save and use the money for a down payment on a house at age 35.  

And he was totally sold.  He is now working his little butt off every week to meet his $10 goal.  I LOVE seeing his enthusiasm.  I hope he sticks with it. 

"Time to Invest!"

I swear this was not scripted. 

A Word About Different Investing Accounts for Kids

Why a UTMA, you might ask? Why not a 529? Or a Roth IRA?


A 529 is a college savings account.  It has the advantage of giving us a tax break in NY state at (we can deduct $10k/year).  We contribute to this for him regardless of what he does, but it is harder for him to understand and see the growth here. 

Additionally, he will have to spend this money on education expenses only. 


A UTMA (Uniform Transfers to Minors Account) account is a tax free account for minors that transfers to them at age 21.  It does not have any limitations on how the money can be spent.  So, he can do with it as he likes, which I think is fine given that he is earning the money by doing chores.   I like the ownership he gets of this account and how it motivates him to save and invest.  Contributions up to $15,000/year are excluded from the gift tax.   Withdrawals are taxable.  UTMA’s and UGMA’s do count against the student when applying for financial aid.  But, they can be rolled over into a custodial 529 plan, if this becomes an issue.  


A UGMA (Uniform Gift to Minors Account) is similar but was limited to securities transfers.  The UGMA matures when the child turns 18.

Roth IRA

A Roth IRA:  A Roth IRA can be opened for a child if the child has actual taxable earned income from a business.  It has the benefit of withdrawing tax-free but tax is paid initially when the income is earned.  My little guy will get compensated for his time modeling here on this blog, so he’ll have one of these, too.  

A Word about Acorns

Full disclosure, I write for Grow so that’s why I wanted to try Acorns. But, this post is not sponsored by Acorns. I like that the interface is so user-friendly and it is easy for my kids to see visualize what’s happening. It also offers the option of round-ups (it rounds up every purchase in your checking account to the next dollar and invests the difference). But, it is pricey- our plan in $3/mo. For now, it serves the purpose of getting my kids motivated. But, as they grow up and understand these concepts better, I will probably move my kids’ UTMA to a lower cost brokerage. When we do, we can have a nice conversation about the costs of investing and how to keep them low.

That’s all for today!

Stay frugal, y’all!


Standard Disclaimer:  Not meant as individualized financial or medical advice.  This post contains affiliate links.              


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