3 Different Ways to Grow Your Child’s Money with Investments
Money for kids. It sounds simple, right? You give them a piggy bank, drop in a few coins now and then, and hope they learn the magic of saving. But as I’ve learned raising my own little ones (and chatting with other parents at school gates and farmers’ markets here in the US and UK), money habits don’t just happen. They’re taught. And one of the most powerful lessons we can give our children is how to make money grow instead of just spending it.
When my daughter turned nine, she had a drawer full of birthday cash from grandparents. She wanted to spend it all on craft kits and snacks. I wanted to show her something different: that money can grow. That’s how we started dabbling in small, child-friendly investments. Nothing fancy. No big risks. Just simple ways to let her see her money do a bit of work while she slept.
If you’re reading this, you might be wondering the same thing. How do you go beyond the piggy bank or savings account and show your child the power of investing? How do you do it without risking their hard-earned allowance? In this post, I’ll share three down-to-earth ways I’ve used (and seen other parents use) to grow a child’s money through investments. We’ll talk about what works, what doesn’t, and how to keep it age-appropriate.
1. Opening a High-Interest Savings or Junior Investment Account
The simplest way to get your child’s feet wet in the world of investing is with a high-interest savings account or a junior investment account. This isn’t about playing the stock market; it’s about teaching them how to grow money slowly and safely. In the UK, you might look at Junior ISAs. In the US, custodial accounts under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) can be a good start.
These accounts let your child’s money earn a little interest or be invested in low-risk funds. When my son was seven, we opened a junior savings account for him. He loved checking the balance online and seeing it tick upward by small amounts. It wasn’t much, but it gave him a sense of ownership. That’s the whole point — you’re planting a seed, not creating a Wall Street prodigy.
If you’re worried about risk, start with something guaranteed. High-interest savings accounts or government-backed bonds are a good first step. The key is letting your child see the cause-and-effect: money saved leads to money earned, even if slowly. It’s a gentle way to introduce investing without overwhelming them.
2. Investing in Child-Friendly Index Funds or ETFs
Once your child understands the basics of saving, you can step it up with index funds or ETFs (exchange-traded funds). Think of these as baskets of investments that track the market. They’re usually less risky than picking individual stocks, and many custodial accounts in the US or Junior ISAs in the UK offer them.
This is where your child can start seeing real-world investing in action. When my niece turned twelve, her parents opened a custodial account and invested part of her birthday and holiday money into a broad index fund. She checks it once a month and can see it go up and down. It’s a perfect teaching moment about risk, patience, and the long-term nature of investing.
Keep it simple. Choose broad funds that mirror the overall market rather than trendy stocks. Show your child a chart of how that fund has grown over the past ten years. Talk about compound interest — money earning money. It’s a powerful concept that can shape how they handle money for life.
And yes, there’s a chance the market dips. That’s actually a good lesson. It teaches them that investing isn’t instant gratification. It’s about the long game. Like planting beans in the garden, you don’t see results the next day, but with time, something solid grows.
3. Starting a “Mini Business” or Micro-Investment Project
Not all investing is about banks and stock markets. Sometimes the best investment for a child is in themselves — starting a small business or micro-project that earns money. This could be as simple as selling homemade crafts, running a weekend lemonade stand, or even investing their allowance into supplies for a small hobby-based business.
When my son wanted a new bike, I challenged him to fund half of it himself. He used some of his allowance to buy bulk packs of seeds, planted them in small pots, and sold the seedlings to our neighbours. It wasn’t glamorous, but he learned what it means to put money into something and get more out of it. That’s investing too.
This approach shows kids the direct link between effort, money, and return. They’ll learn about costs, profits, and maybe even a little marketing. And unlike an index fund, the results are often immediate, which can be a big motivator for younger children.
If you’re not sure where to start, think about your child’s interests. Do they love baking? Could they sell cupcakes at a local event? Are they into art? Could they sell prints or stickers online? Small, low-cost projects like this can teach entrepreneurial thinking and investing basics without the complexity of financial markets.
Bonus Tips for Parents
- Keep everything transparent. Show your child where the money goes and how it grows.
- Involve them in the decision. Ask if they’d like to put some of their birthday money into savings, an index fund, or a mini project.
- Match their contributions. If they save $10, you could add $10. It’s a powerful motivator and teaches the value of matching schemes like employer contributions later in life.
- Celebrate milestones. When their savings hit a certain goal or their mini business makes its first profit, mark the occasion. Kids thrive on positive reinforcement.
Common Questions Parents Ask
Isn’t investing too risky for kids?
It depends how you do it. High-interest savings accounts and broad index funds are relatively low risk. Start small and safe.
What if my child wants to take their money out early?
That’s a chance to talk about patience. You can set clear rules about when they can withdraw.
How much should we start with?
There’s no magic number. Even £10 or $10 can teach the basics of growth. The key is consistency, not size.
Do I need to be a financial expert?
No. These methods are simple enough for any parent to use. The point is to learn alongside your child.
A Relatable Scenario
Last year, my 11-year-old saved $50 from chores and gifts. She wanted to buy a video game. Instead, we agreed to put $30 into a low-risk index fund through her custodial account and use the other $20 to buy supplies for a mini baking project. She sold cupcakes at a local farmers’ market and doubled her money in two weekends. Meanwhile, she checks her account once a month and sees the $30 slowly inch upward.
Now, when she talks about money, she doesn’t just think about spending. She thinks about saving and growing. That’s the power of introducing investing early — it changes their mindset.
Wrapping It All Up
Growing your child’s money with investments isn’t about creating a kid-sized stock trader. It’s about planting seeds of financial literacy that will grow with them into adulthood. You don’t need a big budget or fancy tools. You just need a plan and the willingness to involve your child in it.
Start with a safe savings or junior investment account. Move to index funds when they’re ready. Encourage them to try small business projects. Show them how their money can work for them, not just sit in a piggy bank.
Will they make mistakes? Of course. But isn’t that the point — learning in a safe space before the stakes are high?
