The Power of Early Investment: Why Every Parent Should Start Now

Posted on July 14, 2025

Reading time: approximately 5 minutes

As parents, we all want the best for our children, including their financial future. One of the most powerful tools available to ensure that our kids have a secure financial foundation is starting early with investments. Investing early is a proven strategy for building wealth, and it’s a gift that keeps on giving. In this blog post, we’ll explore the immense benefits of early investing, why it’s so important, and how parents can start making their money work for their children, even with limited funds.

At Young Money Movers, based in Decatur, we’re passionate about helping families understand the importance of financial literacy and investing. Whether you’re a seasoned investor or just starting to think about your child’s future, this guide will give you the insight you need to get started.

The Benefits of Starting Early

The earlier you start investing, the more your money has the potential to grow. This is primarily due to compound interest, which allows you to earn returns on both your initial investment and the interest it generates. The longer your money remains invested, the more it multiplies.

Time is Your Greatest Asset

When you begin investing early, you give your investments the maximum amount of time to grow. For instance, if you invest $100 a month for 10 years and your investments grow at an average rate of 7% per year, you’ll have a solid sum by the end of that period, even though you only contributed $12,000. Starting even earlier—say, when your child is born—gives those investments even more time to grow, making early investment a powerful tool in securing financial stability for your children.

The Impact of Compound Interest

Compound interest is one of the most important concepts when it comes to building wealth. In simple terms, compound interest allows you to earn interest not just on your original investment but also on the interest your investment has already earned. The longer your money sits in an investment, the more it grows exponentially.

For example, if you begin investing for your child at age 5 and continue to invest consistently until they are 18, their money will have nearly two decades to benefit from compound interest. If you invest $1,000 annually in a diversified portfolio with an average return of 7%, that investment could grow to over $25,000 by the time your child reaches adulthood.

The Power of Consistency

Investing regularly, even if it’s a small amount, allows your money to benefit from compounding over time. Whether you invest $50 or $500 per month, consistent contributions ensure that you’re building a stronger financial future for your child. Starting early amplifies this effect, making the most of each dollar invested.

Why Every Parent Should Start Investing Now

Many parents put off investing because they feel that they don’t have enough money to start. But the reality is that it’s better to start with a little than to wait until you have a large sum to invest. Here are a few reasons why you should start now:

• Building Wealth Takes Time: As mentioned earlier, the more time your investments have, the more they’ll grow. Waiting to invest means you lose valuable time that could otherwise be spent growing your wealth.
• Financial Security for Your Child: Starting an investment plan early ensures that your child has a solid foundation for their future. Whether it’s for college, their first home, or retirement, early investing can give them a significant financial head start.
• Hitting Milestones Earlier: The earlier you invest, the sooner your child can reach financial milestones, whether it's for buying their first car or paying off student loans. Starting early puts them in a position to achieve financial goals earlier in life.

The Best Investment Accounts for Children

When it comes to investing for your children, there are several accounts you can use to get started. Below are a few of the most popular and effective options:

1. Custodial Accounts (UGMA/UTMA)

A custodial account is one of the easiest ways to begin investing on behalf of a minor. These accounts are set up in your child’s name, but you, as the custodian, manage the account until they reach adulthood. The assets in these accounts can be used for any purpose, from education to purchasing a car.

2. 529 College Savings Plans

A 529 plan is a tax-advantaged account designed specifically for saving for college. The funds in this account grow tax-deferred and can be withdrawn tax-free when used for qualified education expenses. This is a great option for parents looking to save for their child’s future education.

3. Custodial Roth IRA

A Roth IRA can be a great option for young investors. If your child has earned income—such as from a part-time job or business—they can contribute to a Roth IRA. The benefit of a Roth IRA is that the earnings grow tax-free, and withdrawals in retirement are also tax-free. Starting a Roth IRA early gives your child decades to grow their money.

4. Junior ISAs (for UK-based Families)

In countries like the UK, Junior ISAs are available and offer tax-free growth, much like a 529 plan. You can invest in cash or stocks and shares with this account.

The Right Investment Strategies for Beginners

Once you’ve chosen the right account, it’s time to consider which investments to make. Here are some strategies to get started:

1. Low-Cost Index Funds and ETFs

For parents who are new to investing, index funds and exchange-traded funds (ETFs) are great starting points. These funds are designed to track the performance of a market index, such as the S&P 500, and offer built-in diversification. They’re also low-cost, which means you don’t have to worry about high management fees eating into your returns.

2. Dollar-Cost Averaging

Dollar-cost averaging is a strategy where you invest a fixed amount regularly, regardless of market conditions. By doing this, you reduce the risk of investing a lump sum during a market downturn, and over time, you’ll be buying more shares when prices are low and fewer when prices are high. This strategy can help smooth out the market’s ups and downs.

3. Dividend-Reinvesting Strategies

Dividend-paying stocks can provide steady income, which can be reinvested to buy more shares of the same stock or fund. By reinvesting dividends, you can accelerate your wealth-building process and benefit from the power of compound interest.

Common Mistakes to Avoid

Starting to invest for your child’s future is a great first step, but there are a few common mistakes that parents should avoid:

1. Waiting for the "Right Time"

Many parents delay investing because they think they need a large sum to get started or believe they need to wait for the "perfect moment." The best time to start is always right now. Even small, consistent investments can grow significantly over time.

2. Not Diversifying Enough

Investing in a single stock or asset class can be risky. Instead, focus on diversification to spread risk. Consider a mix of stocks, bonds, ETFs, and other assets, ensuring that your child’s portfolio can weather market volatility.

3. Ignoring Fees

High fees can eat into your returns over time, so it's important to choose investments with low fees. Always look at the expense ratios of mutual funds or ETFs before investing, and avoid accounts with high maintenance fees.

Starting early with investments is one of the best gifts you can give your children. The power of compound interest, the ability to diversify, and the opportunity to invest small amounts over time all contribute to creating lasting wealth. By taking action today, you’ll ensure that your child has a solid financial foundation for their future.

At Young Money Movers, we are committed to helping families understand the importance of early investing and guiding them through the process. Whether you need help opening an investment account, selecting the best investments, or creating a long-term strategy, we’re here to help.

If you're ready to take the next step in securing your child's financial future, don't hesitate to reach out. Contact us at (404) 307-6447 or email us at [email protected] to get started.