Free lesson · Lesson 21 in the app
What is Investing?
What investing means, what you can invest in, and why it comes with risk.
About 8 minutes · 10-question quiz · Ages 10 and up
Learn
You've learned how to save: spend less than you get and put the difference aside (Lesson 11). Now it's time for something even more powerful: investing.
Investing is how ordinary people, not just the rich, have built real wealth over their lives. It's how pocket money put aside at 12 can become a big help at 30. It's how small amounts today become much bigger amounts later.
A jar of coins never grows on its own. Investing is how you get money to grow.
So what exactly is investing? Let's find out.
The Simple Definition
Investing means putting your money to work so it can grow.
When you invest, you buy something you expect to become more valuable over time, or that pays you money while you own it.
Think of it like planting a seed. You give up the seed today. In return, it might grow into a tree full of fruit. The fruit is yours, and the tree can keep on growing more.
Saving keeps your money safe. Investing sends it out to work.
What Can You Invest In?
There are four main types:
- •Shares (also called stocks) - tiny pieces of ownership in companies like Tesco or Greggs
- •Bonds - a loan to a company or government, which pays you interest and gives your money back later
- •Funds - baskets holding many shares or bonds, so one purchase gives you a tiny piece of hundreds of companies. The index funds from Lesson 19 are one kind.
- •Property - houses, flats or buildings that can rise in value or earn rent
You don't need to understand them all yet. Later lessons take each one in turn.
Investing Is Ownership
Here's the key idea. When you buy shares, you become a real owner of a real business.
Buy one Tesco share and you own a tiny slice of every shop, every delivery van and every tin of beans on the shelves. You're also entitled to a slice of the profits.
That's what makes investing different from gambling. You're not betting on a random number. You own part of businesses that employ people, make things and serve customers. When they grow, you share in it. Lesson 26 looks at this more closely.
Why Invest?
Over the long run, shares have grown by about 7% a year more than prices rise - history, not a promise. At 7%, money roughly doubles every 10 years (the Rule of 72, Lesson 15).
So £100 invested could become:
- about £200 after 10 years
- about £390 after 20 years
- about £760 after 30 years
Savings accounts have usually grown much more slowly, often only a little faster than prices, and sometimes slower.
There's a catch: risk. Shares go up and down, and in a bad year they can fall a lot. So investing suits money you won't need for many years. Lesson 22 puts a number on that.
Investing Is for Everyone
You might think investing is only for rich people in suits. It isn't.
- •Some investment apps let you start with a few pounds
- •You don't need to be a genius or a money expert
- •Starting young gives you the biggest advantage: time
- •Thanks to John Bogle (Lesson 19), index funds let you own hundreds of companies for a tiny fee
You already have the foundations: save, start early, let growth build on growth, and keep costs low. Now you know what investing is.
Coming up next: Lesson 22 - saving vs investing, and how to tell which money belongs where.
Practice
No marks here. Have a think, or talk it through, then open a model answer.
The Safe Choice
Your friend says: "Why bother investing? My savings account is safe, and I still earn interest."
Question: How would you explain why investing might be worth a look, while agreeing with their point about safety?
How are saving and investing different? Think about safety, growth and what you own.
One Share of Greggs
You buy one share in Greggs, the bakery chain from Lesson 13.
Question: What do you actually own now, and what could you get from it?
Try the quiz
Pick an answer to see if it's right, and why.
Question 1 of 10
What is investing?
Question 2 of 10
What are shares (also called stocks)?
Question 3 of 10
True or False: Over long periods, shares have usually grown more than money in savings accounts.
Question 4 of 10
In the lesson's example, £100 grows about 7% a year. Roughly what is it worth after 30 years?
Question 5 of 10
What is a fund in investing?
Question 6 of 10
True or False: You need thousands of pounds to start investing.
Question 7 of 10
When you buy a share of a company, what do you become?
Question 8 of 10
What is the "catch" with investing mentioned in the lesson?
Question 9 of 10
What does the lesson compare investing to?
Question 10 of 10
Why is investing different from gambling?
10 questions. Nothing is saved, so have a go.
Where a lesson mentions another lesson by number, the free ones are linked. The rest are in the app.
Keep going in the app
In Squids-In, children work through more than 100 short lessons like this one, in order, alongside a friendly investing game. You can see how they're getting on. It's free while we test it with a small group of families.