Investing for Kids: Stocks, Bonds, and Bitcoin Compared

We're not financial advisors. Nothing here is investment advice. We're parents sharing what we've learned. Do your own research and talk to a professional before making financial decisions for your family.

Investing means putting your money to work so it grows while you sleep. Instead of letting dollars sit in a jar (where they quietly lose value every year), you convert them into something you think will be worth more later.

The question isn't whether to invest. It's what to invest in. And every option carries tradeoffs that most “investing for kids” articles gloss over. Stocks have people-risks. Bonds lose to inflation. Real estate bleeds cash. Bitcoin is volatile.

Here's the honest comparison.

Stocks: owning a piece of a company

When you buy a stock, you own a tiny fraction of a business. Buy one share of Nike out of 1,000 total, and you own 1/1,000th of Nike. If Nike does well, your slice gets more valuable. If Nike tanks, so does your slice. (We cover the basics in our stock market for kids guide.)

The S&P 500, a basket of 500 large U.S. companies, has returned roughly 10% per year on average since 1957 (about 7% after inflation).¹ Sounds great. But here's what that number hides.

Michael Saylor has identified 24 separate risks that come with owning stocks.² The big ones: governance risk (the CEO makes terrible decisions or the board starts a civil war), technology risk (a competitor makes your product obsolete, like cars did to buggy whips), competitive risk (someone builds it cheaper overseas), regulatory risk (the government changes the rules on you), and dilution risk (the company prints more shares, watering down your ownership without asking permission).

That last one is the fallback. When a company fails to manage any of the other 23 risks, they issue more stock to cover the damage. Your 1/1,000th becomes 1/2,000th. Saylor calls dilution the “ultimate consequence” of equity risk.²

And here's the part that makes the 10% annual return less impressive: Saylor argues the S&P 500 mostly just tracks the expansion of the money supply (about 7% per year). The underlying companies are generating maybe 2-3% in real organic growth. The rest is the dollar getting weaker.³ You're not getting richer. You're treading water.

Bonds: lending money to governments and companies

A bond is a loan you give to a government or corporation. They promise to pay you back with interest. The U.S. 10-year Treasury bond currently yields about 4.3%.⁴ Sounds safe. It is safe, in the sense that the U.S. government will almost certainly pay you back.

The problem: inflation. If the true cost of living rises 7% per year (Saylor's estimate, based on the money supply expansion rate rather than CPI)³ and your bond pays 4.3% before taxes (closer to 3% after), you're losing about 4% of your purchasing power every year. That's not a rounding error. Over 10 years, you could lose roughly half your buying power.⁵

Even using the official CPI of 3.3% (March 2026),⁶ a 4.3% bond barely breaks even after taxes. Bonds are “currency derivatives,” Saylor says.⁵ They're denominated in dollars, and dollars leak value. So the bond leaks too.

Your deposits at a bank are insured up to $250,000 by the FDIC.⁷ That protects you from the bank failing. It doesn't protect you from the dollar failing.

Real estate: the leverage game

Real estate is the asset class Americans love most. Buy a house, watch it go up. Simple, right?

Not exactly. First, the property tax bleed. The average U.S. property tax rate is about 1.1%.⁸ In states like Florida and New Jersey, it can hit 2% or higher. Saylor points out that at a 2% annual tax with upward reassessments, you pay the government the entire original value of your home in taxes over 25-30 years.³ You don't own the house. You rent it from the state.

Then there's maintenance (3-4% of the home's value per year), transaction costs (6% agent fees, 30-day closings), location risk (the neighborhood declines, the factory closes, the city dies), and natural disaster risk (hurricanes, floods, fires). You can't move a house to a better jurisdiction. Try relocating a beachfront property from a state that just doubled its tax rate.⁹

Real estate can build wealth, especially with leverage (borrowing to buy). But it's illiquid, expensive to maintain, and politically vulnerable. As we explain in our credit and debt guide, a 3% mortgage during 7% inflation is actually a good deal for the borrower. The catch: you need the income to service that debt, and the house still bleeds cash from every direction.

Index funds: the “just buy everything” approach

Warren Buffett has said most investors would do better just buying an S&P 500 index fund.¹⁰ An index fund owns tiny pieces of hundreds of companies at once. When one company implodes, the others carry the weight. This is the “set it and forget it” strategy, and it's genuinely good advice for most people.

Charlie Munger (Buffett's late business partner) had a sharper view. He compared the stock market to a pari-mutuel betting system at a racetrack: the odds adjust based on where the money flows, making it “very hard to beat the system.”¹¹ Munger's solution? Find a few great bets, load up, and sit on your hands.¹¹ He called it “sit-on-your-ass investing” and pointed out the tax advantage: never interrupting compound interest can add 1-3 extra percentage points per year over decades.¹¹

But Munger also warned about competitive destruction: even the finest buggy whip factory gets wiped out when someone invents the car.¹¹ Of the original 500 companies in the S&P 500 in 1957, fewer than 60 remain today.¹² The index survives because it swaps out the dead for the living. Individual companies don't get that luxury.

Bitcoin: the fixed-supply alternative

Bitcoin has no CEO. No board of directors. No employees who can unionize. No one can make a bad acquisition, get sued for patent infringement, or issue more shares to dilute your ownership.

There will only ever be 21 million bitcoin. That cap is locked into the code. Nobody can print more. While every company in the S&P 500 can (and routinely does) issue more stock, Bitcoin's supply is fixed. Saylor frames this as the key difference: stocks carry 24 layers of human risk. Bitcoin carries zero.²

The tradeoff: volatility. Bitcoin has dropped 80%+ from its highs multiple times. In 2022, it fell from roughly $69,000 to under $16,000.¹³ If you bought the top and panicked, you got crushed. If you held through, it recovered and then some. This is not for the faint-hearted. But over any 4+ year holding period in Bitcoin's history, holders have been in profit.

Bitcoin also carries no counterparty risk (if you self-custody, nobody can freeze or seize it), no maintenance costs (unlike a house), and no management fees (unlike a fund). For a full breakdown of the safety considerations, see our Bitcoin safety guide. And if you're ready to start, here's how to think about buying Bitcoin for your kid.

Side-by-side comparison

No single row tells the whole story. Read it across. Every asset wins somewhere and loses somewhere. The question is which risks you're willing to carry. For a focused comparison of Bitcoin against a specific savings vehicle, see our Bitcoin vs. 529 plan guide.

Try this at home: the $100 paper portfolio

Ages 10+. Setup: 15 minutes. Duration: 30 days.

Give your kid a pretend $100 and have them split it across 4 assets:

• $25 in a single stock (pick one they know: Nike, Disney, Apple)
• $25 in an S&P 500 index fund (use SPY as the ticker)
• $25 in a bond fund (use BND as the ticker)
• $25 in Bitcoin (use the current BTC price)

Write down the starting prices. Every Sunday for 4 weeks, look up the current prices and calculate what each $25 is worth. Use Google Finance or Yahoo Finance.

After 30 days, talk about what happened. Which one moved the most? Which was the most boring? Did the boring one feel safer? Did the volatile one make more money, or lose more? Ask: “If this were real money, how would you feel about each one?”

Materials: Pen, paper, a phone to check prices. Time: 15 minutes to set up, 5 minutes each Sunday.

Sources

1. NYU Stern School of Business, Historical Returns on the S&P 500 (~10% nominal, ~7% real since 1957)
2. Saylor, Michael. “Bitcoin vs. Traditional Assets”, discussing the 24 risks of equities and dilution as the ultimate consequence (2024)
3. Saylor, Michael. Saylor Series Episode 1, on S&P 500 tracking money supply expansion, real estate property tax, and the 7% annual monetary inflation rate
4. Federal Reserve Bank of St. Louis, 10-Year Treasury Constant Maturity Rate (FRED)
5. Saylor, Michael. Various interviews and Interview on The Breakdown, on bonds as “currency derivatives” with negative real yields (2020)
6. U.S. Bureau of Labor Statistics, Consumer Price Index Summary (March 2026)
7. FDIC, Deposit Insurance FAQs ($250,000 per depositor, per insured bank)
8. U.S. Census Bureau / Tax Foundation, Property Taxes by State (average effective rate ~1.1%)
9. Saylor, Michael. “Bitcoin vs. Traditional Assets”, on immobility of physical property, eminent domain, and political risks
10. Buffett, Warren. Berkshire Hathaway 2013 Annual Letter, recommending low-cost S&P 500 index funds
11. Munger, Charlie. Collected speeches and writings in Poor Charlie's Almanack (2005), on the pari-mutuel system, competitive destruction, and “sit-on-your-ass investing”
12. Innosight / Foster & Kaplan, “Corporate Longevity: S&P 500 Turnover”
13. CoinDesk, “Bitcoin Price Hits Two-Year Low Under $15,800” (November 2022)