How to Teach Finance to a 10-Year-Old

As a financial professional, I can’t help but try to pass on some of what I know about money and investing to others.  

I believe it’s never too early to teach some of the basics of personal finance and investing. That’s why I joined with my daughter Olivia to produce an educational video series on LinkedIn. And with April being Financial Literacy Month, I figured it’s a great time to recap our conversations.  

Olivia was 10 years old when we began this project, and I am sure there were many other things she would have liked to do with her time than talk with her dad about money. But she was a good sport and brought her usual enthusiasm and curiosity. In the end, I think we showed that personal finance and investing can be interesting, even to young people. Olivia enjoyed the experience, as did I, while (hopefully) also learning a few things that will benefit her throughout her lifetime.

Our series began with us stuck at home during the pandemic, kicking off with a crucial and foundational topic: the time value of money. Olivia had what she called a “finance epiphany”: It’s probably better to get $110 next year than $100 today.  

In our second video, we stepped into the world of interest rates. Olivia agreed: It’s pretty cool that you can make money by doing nothing. 

We continued our discussion as I explained one of the most magical and powerful concepts in finance: compound interest. 

In this video, we came into the T. Rowe Price headquarters and brought together our discussions of interest rates and the time value of money, exploring how they can help people achieve long-term goals.

We revisited the topic of compound interest and dug a little deeper.

Then it was time to step beyond the discussion of interest rates and learn about some of the other ways people can invest. Olivia sounded like a pro going over some of the basic asset allocation building blocks, including stocks and bonds.

Of course, no discussion about investing can happen without also talking about risk. Here Olivia and I chatted about the relationship between risk and reward in investments.  

We’ve heard a lot about inflation recently. It has certainly impacted how much we spend on things like coffee (or, in Olivia’s case, hot chocolate). In this video, we explained what inflation is and how it might impact your spending and investing decisions.

Olivia did a great job explaining the concept of diversification. As she said: It’s less risky to spread your money than invest it in a single stock.

In this video, Olivia and I had a chat about what it takes to retire. How early should you start saving? How long should you save? And what should your spending habits be along the way?

No discussion of saving and investing can happen without also talking about spending. As Olivia put it: Whatever money you spend on “stuff” now is money you won’t have access to later.

We delved further into the topic of spending, exploring the idea of choices, and knowing the difference between a “need” and a “want.” 

Finally, we summarized our lessons and revealed the sweet truth behind why Olivia agreed to take part in this series.

For additional resources on teaching children about finance, please take a look at T. Rowe Price’s #MoneyConfidentKids program here https://www.moneyconfidentkids.com

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