People use ChatGPT for everything from meal planning to marketing strategy. Although the generative AI platform is prone to hallucinations, it’s not bad at evaluating complicated concepts and conveying them in simple terms.
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I recently gave ChatGPT this prompt: “Pretend I’m my 12-year-old son, financially curious but a clueless middle schooler. Explain to me how to invest like I’m 12.”
Here are the highlights.
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ChatGPT Answers: Explain ‘How to Invest’ Like I’m 12
“Investing is like planting a tree,” the AI said. “You put in a little money now, and over time, it grows — just like a tree starts small and eventually gives you fruit, shade, or a cool place to climb.”
It said, “Investing is when you use your money to try to make more money over time. Instead of just keeping your money in a piggy bank (which doesn’t grow), you can put it in things that might grow your money, like stocks, bonds, or real estate.”
It went on to elaborate about stocks. “When you buy a stock, you own a tiny part of that company. If the company does well, the value of your stock might go up. But if the company doesn’t do well, the value might go down.”
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ChatGPT also explained how bonds are more secure but have a smaller return.
It also explained the value of long-term investments. “The idea is that over time, the value of your investments will grow. But it might take years, so don’t expect to get rich overnight. Think of it like saving up for a super cool game that costs $50 — you put a little bit away each month, and one day, you’ll have enough,” ChatGPT said.
Then, it emphasized the importance of starting small — a lesson even adults could benefit from. “Even if you only have $10, that’s a great start,” it said.
Assessment
ChatGPT did pretty well with a thumbnail sketch of investing, making it accessible and fun for an active 12-year-old boy.
Question: Savings vs. Stocks
Next, I asked ChatGPT if my son was better off putting the money into a high-yield savings account or the stock market.
ChatGPT’s Response
“The money in a savings account is safe. With a 4% interest rate, your money will grow, but not super fast. For $100, you’d get about $4 more in one year,” ChatGPT said.
However, for long-term growth, ChatGPT recommended stocks: “The goal is to make your money grow bigger, so when you’re older, you’ll have a nice pile of money. Think of it as planting seeds for a money tree.”
Assessment
It’s hard to argue with this logic.
Question: How Much Should I Invest?
Since my son has a window-washing business, occasionally assembles furniture for cash, and gets an allowance of $25 per month, I asked ChatGPT how he should think about divvying up his $100 or so monthly income.
ChatGPT’s Response
“A good rule of thumb is to start small and only invest money that you don’t need for your immediate goals. This way, if you lose some, it’s not a big deal, and you can learn as you go. You don’t have to invest everything you earn — you can save some for things like fun, emergencies, or future big purchases. A good starting point might be 10% to 20% of your monthly income.”
Assessment
This is what I’ve been telling my son since last summer when he launched his local business!
The AI also recommended putting $10 in stocks or an ETF and $5 to $10 per month into a savings account for “safety.” It shared that keeping a buffer of easily accessible money can help with surprise expenses like a broken bike chain, a birthday gift, or an event my son wants to attend. That’s a great tip – and might save me money, too, since parents usually cover those “emergency” expenses for their kids!
ChatGPT on Choosing Stocks
Finally, I asked ChatGPT what stocks my son should invest in.
ChatGPT’s Response
ChatGPT said: “If you’re ready to dive into specific stocks, it’s important to keep in mind that as a beginner, you might want to start with companies you already know or believe in. Do some research with your mom to identify companies you think will grow over the next decade.”
The Gen AI suggested:
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Apple
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Microsoft
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Disney
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Hasbro
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Tesla
Assessment
My son already owns Disney and Tesla, and we’ve been considering Hasbro, along with Nike, Target, and McDonald’s. These stocks should grow over time, although they are all fairly volatile in the current market.
When you’re 12, 14, or even in your 20s and 30s, volatility is okay, which ChatGPT also pointed out. If you want more stability, it recommended looking into ETFs.
Final Take To Go
ChatGPT’s advice for investing like a 12-year-old was on the money. Try these prompts — maybe your tween or teen will listen to ChatGPT better than they listen to you!
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This article originally appeared on GOBankingRates.com: I Asked ChatGPT To Explain How To Invest Like I’m 12 — Here’s What It Said
