Why the stock market always comes back — and why that matters for your child.
In 2008, the stock market lost nearly half its value in twelve months. People who had been investing for decades watched their savings collapse. Millions of Americans sold everything and moved their money to savings accounts, convinced the worst was still coming. They were wrong. Within four years the market had fully recovered, and within ten years it had more than doubled from its pre-crash peak. The people who sold their shares locked in their losses permanently, while the people who stayed invested built more wealth than they had before the crash.
S&P 500 Index Value, 1990–2026
Click the red markers (2002, 2008, 2020) for crash details.
What you actually own when you invest
When a company wants to grow, it needs money. One way to raise it is to sell small pieces of ownership to the public. Each piece is called a share. When you buy a share, you own a tiny fraction of that company. When the company becomes more valuable, so does your share.
Apple went public in 1980 at $0.10 per share, adjusted for splits. A single share today is worth over $200. Someone who invested $1,000 at the initial public offering and never sold would have over $2 million today.
You do not need to pick Apple. The S&P 500 index fund your child's account is invested in owns all 500 of the largest American companies at once. Apple, Microsoft, Amazon, JPMorgan, Johnson and Johnson, and 495 others. When any of them grows, so does your child's account.
Why prices go up and down
In the short term, stock prices move based on what millions of people think a company will be worth in the future. Earnings reports, interest rate decisions, elections, and pandemics can all affect the daily price. This is why the market looks chaotic if you check it every day.
In the long term, prices track something much simpler: whether the underlying companies are actually growing and making money. Over the past century, American companies have grown. The market has reflected that. The short-term noise is real but irrelevant to someone whose account will not be touched for 18 years.
Two investors, one crash
Investor A — Sold in 2008
This investor put in $50,000 and sold at the bottom, permanently locking in a loss of $22,000. They moved the money to a savings account earning 1% annually.
Balance today: approximately $61,000.
Investor B — Stayed invested
This investor also put in $50,000 and did nothing while the market crashed.
Balance today: approximately $287,000.
The stock market is essentially a bet on whether American companies will be worth more in the future than they are today. Over every 20-year period in history, the market has generated a positive return 100% of the time. Your child's account has 18 years of runway before it can even be accessed. Even if that restriction feels limiting, it is actually a structural advantage that removes the temptation to panic. Every crash in that 18 year window is an opportunity, not a threat.