Hi everyone! I’m Zara, and I’m 12 years old. I started Assetsforkids because I think kids are way smarter about finances than adults think.
When you get birthday cash, it’s not just for spending. It’s your chance to build real wealth for your future!
I’ve learned that birthday money investing is great for starting. It’s cash you didn’t expect to have. You won’t miss it if you save it to grow.
Plus, when we’re your age, we have something adults wish they had more of – time! The longer your cash stays invested, the more it can grow.
In this article, I’m going to share everything I’ve learned about turning your birthday gifts into growing. We’ll explore kids investment accounts that could help you buy a car, pay for college, or even start your own business someday.
Why Your Birthday Money is Perfect for Starting to Invest
Most kids spend their birthday money fast. But I learned something new. Birthday money is the best for learning about investing!
Think about it. Birthday money isn’t for something specific. That makes it great investment money. You can let it grow without needing it right away.
Adults say they wish they started investing when they were younger. And guess what? We ARE younger! If I invest $50 of my birthday money now, it could grow to over $300 by the time I’m 30.
| Birthday Money | Allowance Money | Chore Money |
|---|---|---|
| No immediate spending pressure | Often needed for regular expenses | Earned through hard work |
| Comes in perfect learning amounts | Small weekly amounts | Varies by task completed |
| Feels like bonus money | Expected income | Payment for services |
| Perfect for long-term goals | Usually spent quickly | Often saved for specific items |
Birthday money is small and perfect for learning. It’s not money you need for something important. It’s like practice money that can turn into real wealth.
When I invest my birthday money, I’m giving myself a present. It keeps getting bigger every year! This way, I’m working on my children’s savings goals and making investing fun.
What I Learned About Money and Investing as a Kid
My journey into kids money management started with some embarrassing blunders. These blunders turned out to be super valuable lessons. I thought having $20 meant I should find something that costs exactly $20. But I was wrong about how money works!
Learning about compound interest was a big game-changer for me. It’s when your money makes more money, and then that new money makes even more. It’s like having a money-making machine that never stops!
I also learned the hard way about wanting versus needing. Now, when I get birthday money, I ask myself a simple question. Do I want to buy something now that I’ll probably forget about in a few weeks? Or do I want to invest it so I can buy something way cooler later?
Another huge lesson was understanding diversification. That means don’t put all your eggs in one basket. Instead of buying stock in just one company I like, I learned to spread my money across lots of different companies through index funds. This way, if one company doesn’t do well, the others can make up for it.
Here’s the coolest thing about investment portfolio basics that most adults don’t tell you. Investing isn’t just for rich grown-ups! Kids can do it too, and we actually have a huge advantage.
We have time on our side. Every dollar I invest now could be worth $10 or more by the time I’m an adult. That’s the power of starting young and letting compound interest work its magic for years and years.
Building Your Investment Portfolio with Kids Birthday Money: My Step-by-Step Guide
Ready to turn your birthday cash into real investments? Here’s exactly how I do it! I’ve been investing my birthday money for two years now, and I want to share my simple system that actually works.
First, I use what I call the three-way split method. When I get birthday money, I divide it into three equal parts. One third goes to something fun I want right now, like a new game or clothes. One third goes into my savings for bigger goals, like a bike or laptop.
The final third goes straight into investing for my future. So if I get $60 for my birthday, I spend $20, save $20, and invest $20. This way, I enjoy my birthday money but also build wealth for later!
Next comes picking the right account type. Since kids can’t open investment accounts until we’re 18, we need our parents to help us set up custodial accounts for kids. These special accounts belong to us, but our parents manage them until we become adults.
There are two main types to choose from: UGMA and UTMA accounts. Both work similar, but UTMA accounts can hold more types of investments. Here’s how they compare:
| Feature | UGMA Account | UTMA Account |
|---|---|---|
| Investment Types | Stocks, bonds, mutual funds | All UGMA options plus real estate, art |
| Age of Control | 18-21 (varies by state) | 18-25 (varies by state) |
| Tax Benefits | First $1,100 tax-free | First $1,100 tax-free |
| Flexibility | Limited to financial assets | More investment options |
Then you need to choose a brokerage company. I recommend Fidelity, Charles Schwab, or E*TRADE because they don’t charge fees for buying stocks. They also have great educational tools that help young investors like us learn.
The key to successful youth investment strategy is starting simple. Don’t try to pick individual stocks right away! Instead, begin with index funds that track the whole stock market. They’re safer and perfect for beginners.
Getting Help from Your Parents
Here’s the most important part: talk to your parents! They need to open the account and help you manage it. Show them you’re serious about learning by doing research first.
I created a simple presentation for my parents explaining why I wanted to invest. I showed them articles about setting up kids’ brokerage accounts and proved I understood the basics. This convinced them I was ready!
Remember, investing is a team effort when you’re young. Your parents are there to guide you and make sure you make smart choices. Don’t be afraid to ask questions – that’s how we learn and grow our money!
Easy Investment Options That Actually Make Sense for Kids
When I started, all the investment choices seemed hard. But I found some that are great for kids. I use a strategy called “companies I know plus index funds”. It makes stock investing basics easy to get!
I like to buy stocks in companies I use every day. For example, I own Disney stock because I love their movies. I also have Apple stock since I use my iPhone all the time. It’s cool to own a tiny piece of these big companies!
When Disney makes a hit movie, my investment might grow. When I see everyone using iPhones, my Apple stock might go up too. But I only put 20% of my money into these stocks because they can be risky.
The rest of my money goes into index funds for kids. These are like tiny pieces of hundreds of companies all at once. My favorite is an S&P 500 index fund. It owns pieces of America’s 500 biggest companies.
Index funds are great because they’re less risky than individual stocks. They don’t cost much and you don’t need to be a stock market expert. I also like Target Date Funds, which get safer as I get older.
Since I won’t need this money until I’m an adult, my Target Date Fund invests in riskier things. It will automatically become safer as I get closer to needing the money.
| Investment Type | Risk Level | Best For | Starting Amount |
|---|---|---|---|
| Individual Stocks | High | Companies you know well | $25-50 |
| S&P 500 Index Fund | Medium | Long-term growth | $50-100 |
| Target Date Fund | Medium | Hands-off investing | $50-100 |
| Bond Index Fund | Low | Stable income | $25-50 |
The best thing is you can start with just $25 or $50. You don’t need thousands to start. These stock investing basics will help you build wealth over time, even starting small!
How to Watch Your Money Grow and Stay Excited About It
Watching your money grow is like watching a plant bloom. It takes time but it’s amazing! I learned this the hard way when I first started investing my birthday money.
At first, I was checking my investment account every single day. Bad idea! Some days my money went up, other days it went down. I got so stressed that I almost sold everything. Then I discovered that checking too often actually hurts your investing success.
Now I check my investments about once a month, and it’s so much better. I focus on the big picture instead of daily ups and downs. This is one of the most important portfolio monitoring tips I can share with you.
I keep a simple notebook where I write down how much my investments are worth each month. It’s so cool to see the numbers going up over time! I also calculate how much money I’ve “made” compared to keeping it in a regular savings account.
For example, if I invested $100 six months ago and now it’s worth $110, I made $10 just by being smart with my birthday money! Some investment tracking apps can help you do this math automatically.
To stay excited, I set small goals for myself. Like, “I want my investment account to reach $500 by my next birthday.” When I hit these goals, I celebrate by adding more allowance money to my investments!
I also love learning about the companies I own stock in. When Disney makes a new movie or Apple releases a new product, I get excited because I’m a part-owner of these companies!
The best part is thinking about my future. Every time I add birthday money to my investments, I’m investing in my dreams – maybe buying a car, paying for college, or starting my own business!
Conclusion
Using birthday money to build your investment portfolio is a smart choice. Investing isn’t scary or hard for kids. We have a big advantage because we have time on our side.
Every birthday is a chance to grow your wealth instead of buying things you’ll forget. You don’t have to invest all your money. Even $20 or $50 can make a big difference over time.
The journey to financial independence starts with small steps. I’ve learned that building wealth is about making smart choices over and over. Your birthday money today could help buy your first car or pay for college someday.
Once you start investing, you’ll get excited to learn more about money. You’ll find new ways to grow your wealth. Next time you get cash for your birthday, think about your future.
Starting young gives you a superpower that adults wish they had. You have decades for your money to grow and compound. Your future self will thank you for making smart money choices early. You’ve got this!