Time: A Young Investor's Greatest Asset
Teaching Children the Power of Compounding
One of the most important investing lessons parents can teach their children is that time matters more than the amount invested. Starting early, investing consistently and staying invested over the long term can help even small contributions grow into something meaningful.
Many parents start by teaching their children the importance of saving. They encourage them to set aside birthday money, save up for something they want, or think twice before making a purchase. There's another lesson that can be just as important for children: understanding how money can grow over time.
Teaching Children the Value of Time and Patience
When parents think about investing, they may focus more on how many dollars are needed to get started. Children, however, have a powerful advantage: time. Parents can help children understand that time and compounding are two of the most powerful investment principles.
Explaining Compounding to Your Children
You don't need to be an investing expert to explain the principles of compounding. One simple way to describe it is:
“Compounding is what happens when your money starts working for you. It earns money, and then that new money has the chance to earn money too. The longer you leave it invested, the more opportunity it has to grow.”
Helping children understand this principle can encourage long-term thinking and reinforce the idea that small actions today can have a meaningful impact towards their future goals.
Try asking your child:
- "Would you rather have $10,000 today or a dollar that doubled in value every day for a month?"
Many children choose the $10,000. They're often surprised to learn that the dollar eventually becomes worth much more because each day's growth builds on the growth from the day before.
Another way to frame the conversation is to ask:
- " Would you rather start investing $100 a month at age 18 or wait until you're 30 years old and invest $200 per month?"
Assuming an average annual return of 8% and retirement at age 65:
| Start at 18 | Start at 30 | |
|---|---|---|
| Monthly contribution | $100 | $200 |
| Years invested | 47 | 35 |
| Total contributed | $56,400 | $84,000 |
| Estimated value at age 65 | ~$518,000 | ~$454,000 |
For illustrative purposes only. Assumes a retirement age of 65 and an average annual return of 8%. Actual investment returns and results will vary and are not guaranteed.
Despite investing twice as much each month, the investor who starts at age 30 may still end up with less because they had fewer years for compounding. Starting at age 18 gives money an extra 12 years to grow, helping even smaller contributions potentially achieve more over time.
This example can spark a broader conversation about why starting early matters and how factors such as market conditions, interest rates, and time can influence investment growth. It can also be a great opportunity to explain how a financial advisor helps families set goals, make informed decisions, and stay focused on long-term outcomes.
Bring the Lesson to Life
Sometimes seeing the numbers makes all the difference.
The Raymond James Stay Invested Calculator can help families visualize how regular contributions may grow over time. Parents can experiment with different contribution amounts and timelines to demonstrate the impact of starting early versus waiting.
Conversation Starter
- If you received $100 today, would you spend it, save it, or invest it? Why?
Exploring the answer together can turn a financial concept into a practical lesson about how compounding rewards patience, consistency, and long-term thinking. For additional discussion prompts, explore Money-Smart Kids: Facts, Questions & Conversation Starters.
One way to explain compounding to children is to compare it to planting a tree.
In the summer, it grows and flourishes. In the fall, it loses its leaves, and in the winter, it may seem like nothing is happening, but beneath the surface, the roots continue to grow stronger. Investing can work the same way. While markets don't go up every year, giving your investments time to grow can help them weather different seasons and thrive over the long term.
Turn Everyday Moments Into Investing Lessons
Teaching children about investing doesn't need to feel like a classroom lesson. Parents can introduce investing concepts through everyday conversations, for instance:
- Talk about the difference between budgeting and investing for the future.
- Review how a RESP supports long-term education goals.
- Introduce TFSAs, RRSPs, and FHSAs, and how they can help support future goals like retirement and homeownership.
Start the Conversation Today
One of the greatest gifts parents can give their children isn't money itself. It's an understanding of how money can grow. Teaching the power of compounding helps children recognize that building wealth isn't always about having more money to invest. Often, it's about starting early, staying consistent, and giving investments time to work.
Talk to your financial advisor about strategies and tools that can help build financial confidence across generations.
Source: Stay Invested.pdf, Raymond James Ltd. Investment Strategy Team (June 2026).
Securities-related products and services are offered through Raymond James Ltd. (RJL), regulated by the Canadian Investment Regulatory Organization (CIRO) and a Member of the Canadian Investor Protection Fund. RJL financial/investment advisors are not tax advisors, and we recommend that clients seek independent advice from a professional advisor on tax-related matters. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not regulated by CIRO and is not a Member of the Canadian Investor Protection Fund. Solus Trust Company (“STC”) is an affiliate of Raymond James Ltd. and offers trust services across Canada. STC is not regulated by CIRO and is not a Member of the Canadian Investor Protection Fund.
