The Stock Market vs Crypto For Kids
- Will Rainey
- Aug 29
- 4 min read
Updated: Sep 27
I’m a big fan of the ‘Diary of a CEO’ podcast hosted by Steven Bartlett. For those who don’t know this popular podcast, Steven interviews world-renowned experts on a wide range of topics, from sports, politics, health, love and, my favourite topic, money.
When it comes to conversations about money, he has interviewed many people, including Morgan Housel (author of The Psychology of Money) and Ramit Sethi (author of I Will Teach You To Be Rich). Late last year, he interviewed Raoul Pal, an expert on investing in crypto (cryptocurrencies).
Whilst I don’t personally invest in cryptocurrencies, I wanted to listen to the podcast with an open mind. However, the interview really highlighted some fears I have about this area.
Essentially, those who invest in crypto need to heavily promote it because they need to ensure it remains desirable (as that is how it derives its value). This was very clear from the podcast.
In this podcast, Raoul was saying (slightly paraphrasing), “Investing in the stock market is a waste of time as you can’t make a lot of money there. If you want to make a lot of money, you have to invest in crypto!”
I could see a lot of young people listening to this podcast and getting pulled into the dream of making 100% or more in returns every year by investing in crypto. Especially as there are lots of stories of people who have done that (whilst there are lots of stories about people who have lost all their money investing in crypto, these don’t get as much attention).
Now, I’m not here to tell anyone where they should or shouldn’t invest. But I do believe it’s important, especially for kids, to understand the fundamentals of how money is made from different types of investments.
That way, when they grow up, they can make decisions with knowledge rather than being swept up in hype.
Here’s the analogy I use with my kids to help them understand the difference between the stock market and crypto.
🍏 The Apple Tree (The Stock Market)
Investing in stocks is like planting an apple tree.
You plant the seed, and with time and care, it grows.
Every year, it produces apples. Some years more, some years fewer, but always something real and useful.
If a storm damages the tree, it may struggle for a while, but with sunshine and water, it recovers and produces fruit again.
The stock market works in the same way. It represents real companies creating products and services. As these companies grow, they generate profits, like the apples, which means your investment grows too.
To expand on the analogy, in an orchard, there will be lots of different trees. If one gets damaged in a storm, you’ll still be producing apples from your other trees. Similarly, in the stock market, there are lots of companies, so if one does badly, your investments can still do well. This is known as diversification.
Whilst some apple trees (companies) can grow very fast, most of the time it can take years for them to grow. The requirement to be patient puts off a lot of people from planting their own apple trees (investing, not trading, in the stock market).
If you are interested in stories to get your kids both interested and knowledgeable about the stock market, please check out my book Grandpa’s Fortune Fables or my blog How to Teach Your Kids About the Stock Market.
🪨 The Shiny Rock (Crypto)
Crypto, on the other hand, is more like a shiny and rare rock.
It looks attractive and can be highly sought after.
Its value doesn’t come from producing anything, but from how much other people want it.
If more people decide they want shiny rocks, the price can skyrocket. If they lose interest, the price can crash.
One of the features of these shiny rocks is that their desirability, and therefore value, can increase very quickly. This appeals to many people, especially those who don’t have the patience for an apple tree to grow.
To ensure that the value of these shiny rocks stays high, there is a need to make sure they remain desirable. If they are no longer desirable, they can lose their value, and lose it fast.
This is what happened to Tulips, Beanie Babies and NFTs (Non-Fungible Tokens). These were extremely desirable in the 1600s, 1990s and early 2020s, respectively. They became very expensive and made some people very rich. But then they quickly became less desirable as prices got too high, and those who invested in them lost a lot of money.
👉 Read more: How is Crypto and the Labubu craze similar?
The podcast I mentioned, with the crypto expert, made it clear that a lot of people who have invested in crypto are compelled to ensure it remains desirable and, where possible, do their bit to make it seem even more desirable in the future. That way their investments will hopefully go up in value.
🌳 Apple Trees or Shiny Rocks
I hope that as your kids get older and start to consider investing (the second rule of wealth), you share the above analogy with them so they understand the fundamentals. Get them to consider whether they want to grow apple trees or buy some shiny rocks.
It might be that they want a combination of both. I know plenty of people who have lots of apple trees and a few shiny rocks.
My daughters are more excited about growing their trees. They are already seeing that their trees are producing fruit and their orchard is expanding due to the power of Compound Interest.
If you found this blog useful, please like and share it with other families so they can start talking about money. Don’t forget to subscribe to more blogs to help your kids learn about money (and get your free money tracker for kids).
👉 Learn more: If you enjoyed this blog, you’ll also enjoy the following:
How to teach your kids about the Stock Market (Essential)
Investing vs Trading the Stock Market (Related)
The Robot Competition: Compound Interest (Popular)
Thanks for reading,
Will
P.S. Help your kids learn about how to grow their own forest with a copy of Grandpa’s Fortune Fables.
