Teaching Kids the Difference Between Saving and Investing

Table of Contents

Table of Contents

Welcome to our essential guide on helping kids understand the critical concepts of saving vs investing! As parents, we have the opportunity to equip our kids with vital financial skills that will set them on a path to a secure and prosperous future. In this article, we’ll explore how we can introduce the concepts of saving and investing to kids in an engaging and relatable manner, fostering a sense of responsibility and wise decision-making from an early age. 

Why is it important to teach kids about saving and investing?

1. Set a Good Example: Children often learn by observing the adults around them. Demonstrating responsible financial behaviors ourselves, such as saving for goals and making informed investment choices, sets a positive example for kids to follow.

2. Start Early: Introduce the concepts of saving and investing from an early age. Even young children can grasp simple concepts like putting money in a piggy bank or learning to save for a small toy they want.

3. Create Savings Goals: Help kids set achievable savings goals, such as saving for a special outing, buying a favorite book, or contributing to a charity they care about. This instills a sense of purpose and motivation to save.

4. Encourage Saving Jars or Accounts: Provide kids with physical savings jars or open savings accounts in their names. This gives them a tangible representation of their savings and investments and also fosters a sense of ownership over their money.

5. Celebrate Savings Milestones: When kids reach their savings goals, celebrate their achievements! This positive reinforcement reinforces the value of saving and encourages them to continue practicing responsible money habits.

6. Make Learning Fun:Turn financial education into a game or interactive activity. Use educational apps, board games, or role-playing scenarios to teach kids about money management in an engaging and enjoyable way.

7. Introduce Piggy Bank Matching: Consider matching a percentage of the money your child saves. This incentive can motivate them to save more while reinforcing the importance of regular saving habits.

8. Discuss Real-Life Expenses: As kids grow older, involve them in discussions about real-life expenses, such as groceries, utility bills, and entertainment costs. This helps them understand the value of money and the importance of budgeting.

9. Teach Delayed Gratification: Encourage kids to save for larger items they desire, rather than giving in to immediate purchases. This teaches them the value of patience and delayed gratification.

10. Explore Investment Concepts: As children mature, introduce basic investment concepts like stocks and bonds. Use relatable examples or stories to explain how investing can help money grow over time.

11. Invest in Their Interests: If your child expresses an interest in a particular company or industry, consider buying them a share of stock as a fun way to introduce them to investing.

12. Educate About Risk: Discuss the concept of risk with older kids, explaining that investments may fluctuate in value. Help them understand that diversified portfolios can mitigate risks.

13. Encourage Research: Encourage kids to research and learn about different investment options, fostering their curiosity and critical thinking skills.

14. Link to Real-Life Goals: Relate saving and investing to their long-term goals, like funding college education, starting a business, or traveling the world. This connection reinforces the importance of these financial skills in achieving their dreams.

15. Involve Them in Family Finances: Involve kids in age-appropriate discussions about family finances. This helps them understand financial decision-making and the importance of cooperation in achieving financial goals.

By incorporating these ideas into our interactions with kids, we can instill a sense of financial responsibility and independence in them. As they grow, they’ll be better equipped to make informed financial choices and build a brighter and more prosperous future. Remember, the journey of financial education is ongoing, and with patience and guidance, we can empower our kids to take charge of their financial destinies.

How can we explain the concept of saving to kids?

Introducing the concept of saving money to kids can be an enjoyable and interactive    experience. Here’s some examples on how we can make it simple, fun, and engaging:

  • Create Their Personal “Adventure Jar”: Invite the kids to decorate their very own “Adventure Jar” or piggy bank. This jar will become their special place to save money for exciting future adventures, such as a day at the zoo, a camping trip, or even a new bike. Personalizing the jar adds a sense of ownership and excitement.
  • Visual Aids – The Savings Chart: Create a colorful savings chart with different milestones marked as stepping stones to their “Big Adventure.” Each time they reach a milestone, they get to color it in or add a sticker. The visual representation of progress makes saving tangible and enjoyable.
  • Coin Collection Game: Play a coin collection game together as a family. Hide coins around the house or yard, and challenge the kids to find and collect as many coins as they can. The coins they find will go straight into their Adventure Jar, making saving a playful activity.

Here are some exercises that could really help explain the concept of saving:

My Adventure Jar – Savings Adventure Game

Let’s turn saving into an exciting adventure game with our little savers! Here’s how it works:

Step 1: Adventure Planning: Gather the kids and talk about their dream adventures. It could be a fun trip to a theme park, a camping escapade, or anything they wish to experience.

Step 2: Adventure Jar Creation: Provide each child with a plain jar, colorful stickers, and markers. Let them personalize their Adventure Jars by decorating them with stickers and drawing their dream adventures on the jar’s label.

Step 3: Saving Goals: Help the kids break down the cost of their dream adventures into smaller goals. For example, if the trip to the theme park costs $100, they can set a savings goal of $10 for each of the ten weeks leading up to the trip.

Step 4: Adventure Chart: Create a savings chart with the goals for each week leading to the adventure. Whenever they save a portion of their goal for the week, they can mark off a box on the chart or add a sticker to celebrate their progress.

Step 5: Saving Adventure Game: To add some excitement, play the “Saving Adventure Game.” Hide coins or small surprises around the house or yard, and encourage the kids to find and save them in their Adventure Jars. Each treasure they find gets them a step closer to their adventure.

Step 6: Review and Celebrate: Regularly review their progress with the Adventure Chart and celebrate their achievements. Offer words of encouragement and praise for their commitment to saving.

Through this exercise, kids learn the joy of saving and develop financial responsibility, all while looking forward to their thrilling adventures. Saving becomes an exciting and meaningful journey that empowers kids to take charge of their financial dreams.

What are some simple ways to encourage kids to save?

Encouraging kids to save can be a rewarding and valuable experience for both children and adults. One effective way to instill the value of money and responsibility is by linking saving to completing age-appropriate chores around the house. Involving kids in family discussions about budgeting and savings instills a sense of ownership and shared responsibility.

  • Chore-Linked Allowance: Tie a small allowance to age-appropriate chores. By offering compensation for completed tasks, kids learn the connection between work, earning money, and saving. This helps them understand that money is earned through effort and reinforces the importance of responsibility. A great way to implement this with your family is through Invstr Jr – the financial education app for families. When your kids complete a goal (others may call it a chore!), you can reward them with an allowance! Give them incentives to get into great habits – all while learning how to earn, save, and manage money!
  • Family Contributions: Make saving a family affair by involving everyone in contributing to shared family goals. For instance, save together for a family vacation or a home improvement project. This not only teaches teamwork but also shows the importance of collective financial responsibility.
  • Budgeting Lessons: Engage kids in simple budgeting exercises. Help them allocate their allowance among their various savings jars, ensuring they have enough for planned expenses. This exercise instills the habit of budgeting and responsible money management from an early age. Download our Kids Budget Worksheet, a powerful tool to help your kids learn and control their finances and make every dollar count!

By integrating chores and savings in a purposeful manner, kids learn valuable lessons about hard work, money management, and the value of setting and achieving financial goals. These experiences empower them to become financially responsible individuals who are well-prepared for a secure and prosperous future.

What is the difference between saving and investing?


Saving is like building a safety net for the present and near future. When kids save, they set aside a portion of their money for short-term goals and unexpected expenses. Just like putting coins in a piggy bank, they keep their money in a secure place, such as a savings account. This way, they have quick access to their funds whenever they need them.

The Benefits of Saving:

–  Having money readily available for small purchases or treats they want.

–  Being prepared for unexpected expenses, like replacing a broken toy or handling a sudden   expense.

–  Learning the value of patience and delayed gratification as they save for something special.


Investing, on the other hand, is about growing their money over time to achieve bigger goals in the future. Imagine planting seeds in a garden. Just as those seeds grow into beautiful plants, investments have the potential to grow over time and bring in more money. Kids can invest their money in things like stocks or bonds, which represent ownership in companies or loans to businesses or governments.

The Benefits of Investing:

  • Allowing their money to work for them, making more money over time.
  • Building wealth for long-term goals, like buying a car, paying for college, or owning a home in the future.
  • Understanding the importance of making informed choices and managing risk in investments.

Savings vs. Investments:

Timeframe: Saving is for short-term needs and goals, like buying a toy or going to the movies. Investing is for long-term goals that may not be needed for several years, such as saving for college or retirement.

Risk: Saving is generally low risk, as the money is kept in secure accounts. Investing carries more risk, as the value of investments can go up or down based on market changes.
Growth Potential: Saving may earn some interest, but it typically grows slowly. Investing has the potential for higher returns over time, making it a powerful tool for building wealth.

Combining Saving and Investing:

Teaching kids the difference between saving and investing empowers them to use both strategies wisely. They can save for their immediate desires and emergencies while also investing for their future dreams. By striking a balance between saving and investing, they set themselves up for a financially secure and prosperous journey ahead. Remember, knowledge is the key to financial success, and our young learners are well on their way to becoming savvy money managers!

What does investing mean, and how can kids understand it?

To make investing relatable, we can use imaginative storytelling and liken it to becoming a part-owner of their favorite company or supporting the growth of a magical money tree. By making investing concepts fun and engaging, we spark their curiosity and interest.

“Imagine you have a money tree. When you plant a little bit of money in the ground, it starts to grow. The more you take care of it, the bigger it gets. Investing is like planting money in the money tree. Over time, your money grows, and you get more back. So, when you invest, you’re helping your money grow and become even more special!”

How can we introduce the idea of investing to kids?

Introducing investing to kids can be an exciting adventure. We can use educational games and interactive activities that simulate investing scenarios. Through age-appropriate technology, we can demonstrate how investments can grow and inspire them to envision their financial dreams. For example, you can enroll your child in Invstr Academy, our 10-module course on investing – bite-sized and kid-friendly! Invstr is the #1 rated best investing app for education by Bankrate.

For older kids, consider forming a mock investment club with their friends or classmates. Together, they can research different investments, share insights, and track their investments.

We believe that one of the best ways to give your child a head start is to invest in their future by using a robust collection of education and resources to teach your children money management and investing strategies. You can also check out our The Benefits Of Using A Kids’ Investment App To Learn About Money Management article to see how Invstr can help you empower your child.

Did you know? If you invested 10,000 when your kid was born in the the broad market, at 10% annualized return your child would have $3mm by the time they are 60! Now imagine you did that after they graduated from college, it would only be $250k

Now assume you made that same $10,000 investment when you kid turned 25, at 10% annualized it would be worth $281k by the time they are 60.

So now go and make the best investment you can in your kids future! Start when they are born and then be patient! Your kids will thank you when they turn 60.

How do saving and investing serve different financial goals?

Saving and investing serve different financial goals. Saving is great for achieving short-term wishes like buying a toy or going on an outing. Saving prepares kids for unexpected surprises that might come their way. Just like an adventurer who packs extra supplies for their journey, having savings allows them to handle unexpected expenses, like replacing a lost or broken item, without having to worry.

Investing is perfect for those big dreams you have for your future, like going to college, traveling the world, or pursuing your dream job. Just like a wise explorer who plants the seeds of future adventures, investing helps you build wealth over time, preparing you for exciting journeys as you grow into adulthood.

Both are valuable tools for a bright financial future!

What are the key characteristics of saving money?

When introducing the characteristics of saving money to kids, emphasizing the security and accessibility of funds is essential.

The key characteristics of saving money are:

1. Security and Accessibility: Saving money provides a safe and secure way to protect funds, keeping them readily accessible whenever needed.

2. Peace of Mind: Having savings offers a sense of security, knowing there’s a financial cushion for unexpected expenses or emergencies.

3. Tracking Progress: Kids can observe their savings grow over time, motivating them to continue saving and achieve their goals.

4. Responsible Money Management: Saving money teaches kids the importance of responsible financial habits and managing money wisely.

5. Building Towards Dreams: Each deposit contributes to achieving their desired wishes and long-term goals.

6. Confidence and Empowerment: Celebrating savings milestones boosts kids’ confidence and empowers them to make better financial decisions in the future.

What are the key characteristics of investing money?

For investing, we can highlight the potential for growth and the concept of diversification. 

The key characteristics of investing investing are:

1. Potential for Growth:Investing money allows it to grow and potentially become more valuable over time.

2. Long-Term Focus: Investing is best suited for long-term financial goals, such as saving for college or retirement.

3. Risk and Reward: There is a level of risk involved in investing, but with risk comes the potential for higher returns and rewards.

4. Diversification: Investors can spread their money across different investments to reduce risk and increase opportunities for growth.

5. Ownership and Share of Profits: Investing often involves becoming a part-owner of a company, entitling investors to a share of its profits and success.

6. Patience and Time: Successful investing requires patience, as it may take time for investments to grow and achieve significant returns.

7. Learning About Businesses and Economy: Investing provides an opportunity to learn about different companies, industries, and the overall economy.

8. Informed Decision-Making: Wise investing involves researching and making informed choices based on financial knowledge and market trends.

9. Weighing Risk Tolerance: Investors must assess their comfort level with risk and choose investments that align with their risk tolerance.

10. Financial Planning: Investing is a crucial component of long-term financial planning, helping individuals build wealth for their future goals.

How can kids prioritize between saving and investing?

By teaching kids about setting financial priorities, we empower them to make thoughtful decisions. We can guide them in allocating money for both saving and investing, helping them understand the importance of balance in achieving their goals.


As we journey together to empower kids with financial knowledge, we plant the seeds of financial success in our children’s hearts. By teaching kids the valuable difference between saving and investing, we prepare them for a lifetime of financial independence and sound decision-making. Remember, our guidance and support play a significant role in nurturing their financial growth. Let’s continue to inspire and educate, fostering a generation of financially savvy individuals ready to embrace the opportunities that lie ahead. Happy teaching and learning!

This article was generated using automation technology. It has been thoroughly reviewed, edited and fact-checked by an editor at Invstr.

All investing involves risk and can lead to losses.
Past performance does not guarantee future results.
Invstr Financial LLC (Invstr) is registered as an advisor with the SEC. Securities trading is offered to self-directed investors by Social Invstr LLC, a member of FINRA.

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