Explaining Stocks to Kids: A Simple and Fun Guide

These days, we hear about the stock market in the news all the time. Kids might catch snippets of adults talking about their 401(k)s, their investments, or stock tips from Uncle Joe. Naturally, they might get curious. Some parents might be tempted to say, “Oh, that's adult stuff, you’ll understand when you’re older,” but children are often more capable of understanding complex ideas than we realize, especially when those ideas are broken down into small, simple pieces.

That’s why I’m writing this article: to make explaining stocks easy, clear, and fun for kids.
(And if you haven’t checked out my book What Is a Stock?, it’s a fun story that pairs perfectly with this article!)

In this article, I’ll explain what a stock is, introduce a little bit of simple money math (using only whole numbers!), and share a few fun activities you can do with your children to help them understand these concepts even better.

(Stay tuned! I’ll be writing a separate article all about the stock market soon!)

Ok, so what is a stock?

Like chicken stock? Veggie stock? :)

Buying a stock is like owning a piece of a company.

Imagine a big toy store. If the toy store sells stocks, it means they are selling little pieces of the store to people. When you buy a stock, you own a small part of that toy store!
If the toy store does really well and makes a lot of money, the piece you own becomes more valuable.
But if the toy store doesn’t do well, your piece might not be worth as much.

So buying a stock means you are a part owner of a company, even if it’s just a small, small piece!

What does it mean when something is more valuable?

When something is more valuable, it means it is worth more because people need it, really like it, or think it’s important.

For example, a warm jacket is valuable in winter because it keeps you safe and comfortable. The more people need or want something, the more valuable it becomes, and the higher the price people are willing to pay for it. Supply and demand!  :)

 

Stock Math: How a Stock’s Value Can Grow - or Shrink!

Let’s add some numbers to make sense of the explanation!

Imagine your favorite pizza place wants to grow and open new shops, but they need more money. They decide their whole pizza business is worth $100.
To raise extra money, they divide their business into 10 pieces (called shares).

Each share is worth:

$100 ÷ 10 shares = $10 per share

You decide to buy 1 share for $10. Now you own a small piece of that pizza business! YAY!

After some time, the pizza shop became very popular. Now the business is worth $200 instead of $100.

Each share is now worth:

$200 ÷ 10 shares = $20 per share

Since you own 1 share, your share is now worth $20!
You paid $10, so your share grew by $10.

But what if the opposite happens?
If the pizza shop doesn’t do well and the business value drops to $50, then:

$50 ÷ 10 shares = $5 per share

Now your share is only worth $5, meaning you lost $5.

That’s how stocks work: If the business does well, your shares become more valuable.
If the business struggles, your shares loses value.

Activities

1. Look up a stock together.
 Find a publically traded company that your child is family with, find the stock ticker symbol online (like Disney: DIS). Explain to your child what company it represents and the cost of one share. Show them a simple historical chart to demonstrate how stock prices can go up and down over time.

2. Spot businesses while out and about.
 Encourage your child to point out a store they like. Ask, “Why do you like this shop?” or “Would you buy part of their business if you could?” The goal is to spark curiosity, so there are no wrong answers!

3. Notice businesses they don't like.
Have them point out a shop they think isn’t doing well. Discuss it: “Why don't you like this shop?” or “Do you think it's not doing well as a business?” Teach them that not every business is a good investment.

4. Meet a real business owner.
Arrange a short visit to a local flower shop, bakery, or toy store. Let your child see firsthand what it's like to run a business — including the work, the challenges, and the rewards.

5. Design their own dream business.
 Encourage your child to draw their ideal business. Ask them to explain how it would work, how it would make money, and what would make it successful (or not). This builds creative and analytical thinking.