Important information: The value of investments and the income from them can go down as well as up, so you may get back less than you invest.

WE opened Junior ISAs for our two girls when they were toddlers (they’re 11 and 14 now). It recently struck me that they know nothing about these investments. And as they’ll be 18 and in control of their ISAs before we know it, I felt it was time for an investing lesson.

Little did I know they’d teach me a thing or two too.

I started by explaining why we invested, rather than putting the money in the bank. They got the concept of inflation easily (they hear us grumbling about rising prices often enough) and understood that if the money just sat in the bank, with paltry interest rates and rising prices, it’s likely it would lose value in real terms.

Next up, compound interest. I took out a few bags of sweets and started counting them out into a jar.

“Think of these initial 100 sweets as your investments,” I said. “You can’t touch these today, but at the end of the day I’ll give you 10% more. Then each day you have a choice. You can either a) Eat the 10% that I give or b) Keep the extra sweets and I’ll you’ll get 10% of the new total.”

My girls are problem-solvers, so they took out a pencil and paper (see below - this was their third attempt at a neat version I might add) and their eyes lit up as they did the maths to see which option would benefit them more. There was a purity in their joy as they began to understand the power of compounding. And they’re not alone. Albert Einstein once described compound interest as the ‘eighth wonder of the world.’ It made me see the magic of compounding through their eyes.


I then topped up the jar with 159 more sweets to show them what compounding looked like in practice to squeals of delight. They weren’t so pleased when I reached in and took a handful of the sweets and shoved them in my mouth. “Mum,” they shouted, “that’s not fair!”. To which I shrugged and said, “Your investments won’t always go up. So, you have to be prepared for that too.”

You can find out more about compounding in the video below.

Next, I thought I’d talk to them about what companies they’d like to own a slice of - aka shares. My oldest decided she would buy shares in Apple. “I mean, who wouldn’t? What would we do without our phones and iPads, right? And I’d like some shares in Netflix too, as it shows all my favourite programmes. And in Amazon too. You can buy literally everything from there.”

Hearing her talk so passionately about what was familiar and meaningful to her, reminded me of Peter Lynch legendary Fidelity Investments fund manager and philanthropist, who was well known for his ‘invest in what you know’ investment principle. I realised that that’s what my child was doing. Easy Invest also helps investors invest in what they know, as it gives them access to some of the world’s biggest companies in one simple, low-cost fund - The Fidelity Index World Fund.

“And what about Disney?” my youngest chipped in. “It’s magical. People will always want to go to Disney! I’d buy shares in Disney. Mum… when can we go?”

At which point, I declared we’d probably all had enough for one day (before I had to explain the concept of bankruptcy to them). So, I shooed them outside to go on the trampoline. And as I watched them fooling around - after appearing so grown-up just moments before - I realised that I’d got as much out of teaching them about investing, as hopefully they did.

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Overseas investments will be affected by movements in currency exchange rates. Tax treatment depends on individual circumstances and all tax rules may change in the future. Junior ISAs are long term tax-efficient savings accounts for children. Withdrawals will not be possible until the child reaches age 18. A Junior ISA is only available to children under the age of 18 who are resident in the UK. It is not possible to hold both a Junior ISA and a Child Trust Fund (CTF). If your child was born between 1 September 2002 and 2 January 2011 the Government would have automatically opened a CTF on your child’s behalf. If your child holds a CTF they can transfer the investment into a Junior ISA. Please note that Fidelity does not allow for CTF transfers into a Junior ISA. Parents or guardians can open the Junior ISA and manage the account but the money belongs to the child and the investment is locked away until the child reaches 18 years old. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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