Why you shouldn't tell your children to invest

By Andrew Hallam - October 31, 2023

Do you remember what it felt like when you first earned money?

I’m not talking about money your parents might have given you.

I’m talking about the first dollar, euro or pound that you truly earned.

At 12 years old, I babysat the neighbour’s kids. Later that year, I started my first paper route. That money was freedom. I could buy as much candy as I wanted, or (with a bit of coaching) save for a fishing rod.

If we tell our children to invest, it tosses a chain around that freedom. It’s like telling a newly freed prisoner to spend their weekends in jail.

As adults, we know the importance of investing. We’re especially aware of the power of starting early. Whether your own children are 12, 18 or 25+, you might feel the need to tell them what to do. “Invest your money for the future, blah, blah, blah. You’ll be old one day, blah, blah, blah.”

Telling your children what to do might work. But let me suggest something better.

I taught personal finance at a high school. In the beginning, I told students to invest. I even showed them how, while explaining the miracle of compound interest.

Excited by the subject, I jumped on desks like a monkey. The students liked that. But the topic?

Yawn.

The second year, however, I found a better strategy. And almost 40 percent of my high school students (with help from their parents) opened investment accounts.

Here’s what you could try at home.

First, tell your child that it pays to be lazy.

This should put their head on a swivel, working as a hook.

Next, ask them to respond to the simple maths questions in red. Don’t do it for them.

How laziness pays

Justin saves $3,650 /year from age 19-65	Emma saves $20,000 /year from age 40-65
$3,650 x 46 years	$20,000 x 25 years
How much does Justin save?	How much does Emma save?

How laziness pays

Justin saves $3,650 /year from age 19-65	Emma saves $20,000 /year from age 40-65
How much does Justin save?	How much does Emma save?
$3,650 x 46 years = $167,900	$20,000 x 25 years = $500,000

Justin saves $167,900.

Emma saves $500,000.

Now ask, “If Justin and Emma had the same jobs over their lifetimes, and they earned the same incomes, which one of them could spend more of their income on cool things?”

Once again, make sure your child answers this.

The correct answer is Justin. He saves less, overall. That means, over his lifetime, he can spend more of his income.

Now ask them to focus on how this money would grow, given the scenarios in red.

How laziness pays

Justin saves $3,650 /year from age 19-65	Emma saves $20,000 /year from age 40-65
How much does Justin save? $167,900	How much does Emma save? $500,000
And if it were invested?
$3,650 /year 9% earned /year 46 years	$20,000 /year 9% earned /year 25 years
What would it be worth at age 65?