How do fund managers talk to kids about investing?

As children prepare to head back to school, the Association of Investment Companies (AIC) has asked investment trust managers how they explain investing to children. 

With three in five UK parents feeling anxious about their children’s financial futures, financial education from a young age is vital. Conversations around money peak between the ages of seven and nine, according to AIC research, emphasising the importance of fostering financial literacy well before children hit their teens.

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “I have been talking to my children about money and investing since they were toddlers. We started off by playing shops and saving in piggy banks. I explained that the pennies in a piggy bank won’t grow so investing the money where it can grow is a better idea. Each child has a Junior ISA which has provided an ongoing opportunity for us to talk about investing. Talking to children about money from a young age is so important and we believe these conversations need to include investing.”

The AIC has created an online resource, Futureproof your family, to help explain how investment trusts can be used to help secure families’ financial futures. 

How do you explain investing to children? 

Gabriel Sacks, Co-Manager of abrdn Asia Focus, said: “I often use simple examples with my kids. Imagine you discover the best sweet shop in the world, that you think is going to be very successful. You decide to lend the owner £10 to help them open a new store. If the shop thrives and sells lots of sweets, they might give you back £15, £20, or even £30. But if the shop doesn’t succeed, you might not get your money back, so it’s important to choose wisely.

I tell my children that people invest so they have money set aside for when they’re older and no longer working, or for special occasions like Christmas, or unexpected emergencies like hospital visits. It’s about planning for the future and building financial resilience.”

Mike Seidenberg, Manager of Allianz Technology Trust, said: “When my children were younger, I described fundamental investing as being a detective and looking at lots of pieces of evidence in order to make a decision to invest. You will never have all the information to move forward so you need to use your brain in order to think about what the outcome might be. I also told them I have the greatest job in the world where I get to interact with some of the brightest business minds creating companies whose products are used by billions of people and I get to spend time asking them questions and listening.”

Paul Niven, Fund Manager of F&C Investment Trust, said: “When speaking with young people about investing, I emphasise the incredible power of compound growth, what Albert Einstein described as ‘the eighth wonder of the world’. I explain how a £100 investment into F&C Investment Trust has grown to around £24 million over the period since its launch in 1868, dramatically outpacing inflation which would have only grown to about £15,000. 

I’ve found that connecting investing to long-term life planning resonates with young people. I discuss how today’s children may live remarkably long lives, potentially becoming ‘centenarians,’ with one in five girls and one in eight boys born today expected to reach 100 years old. This longevity means they’ll need to fund potentially 30-plus years of retirement, making early investing crucial for creating future financial choices.”

Sue Noffke, Manager of Schroder Income Growth Fund, said: “When I speak to my children and young relatives about investing, I try to keep it relevant and relatable by linking it to the real world – their world. Concepts resonate more when explained through things they understand and care about, so I use examples from technology and brands such as Apple, Netflix, Tesco and Hollywood Bowl, which are part of their daily lives. 

I always use plain language, steering clear of industry jargon, and try to weave these discussions into everyday conversations. In my house, that often means talking about my work at the dinner table – discussing market trends, big company news, the effect of government policies on our lives and on people’s finances.”

Alan Gauld, Senior Investment Director at Patria Private Equity Trust, said: “My children are still quite young (my eldest is nine) but they are certainly very aware of money and becoming more aware of saving for the future. I tell them that anyone can invest and investing can make you a lot of money – that second part usually gets their attention! 

Given their ages, I keep the explanation as simple as possible using a theoretical example of a toy shop. I explain that the money I invest gives me a share of the toy company and helps the toy company open more shops in order to get more customers. They can then sell more toys and hopefully make more money. As an investor, I would ultimately get some of that extra money back too on top of my original investment – so my pot of money would grow bigger.”

What’s your one top tip for children about investing? 

Sue Noffke, Manager of Schroder Income Growth Fund, said: “My number one tip would be to keep it relevant and relatable – ensuring that you link ideas to the real world and use examples from everyday life. And, above all, make investing accessible: it is for everyone and the sooner you start, the greater the impact. The best investment anyone can make is to get started early in life and not leave it too late.”

Alan Gauld, Senior Investment Director at Patria Private Equity Trust, said: “Relating it to something they are already interested in can be helpful. For example, Lego is a big thing in our household, and it wouldn’t have succeeded without the backing from the Kristiansen family and other investors over many years. Use the stories of these well-known brands to demonstrate the concept of delayed reward to your children because investing is a long-term commitment.”

Gabriel Sacks, Co-Manager of abrdn Asia Focus, said: “I always remind my kids that money is just a tool. If you earn it and spend it all quickly, you might find yourself stuck without enough for essentials like food or your home. Saving and investing gives you more freedom as you grow older to do the things you enjoy and to feel secure.”

Mike Seidenberg, Manager of Allianz Technology Trust, said: “Invest in products you love and can’t live without, observe the world around you and if you start seeing people use a product or wear a pair of shoes or piece of clothing, track it down.” 

Paul Niven, Fund Manager of F&C Investment Trust, said: “My top tip for children would be to start early and be patient. Equity markets display a slight tendency toward positive returns over time and history shows that with patience, time is on your side; over the past 150 years, investors who held US equities for 20 plus years never lost money.”