It's never too early to start investing. In fact, teenagers can be some of the most lucrative investors in the world.
If you're interested in teaching your teen about investing, then take a look at these 10 Ways To Get Your Teens To Start Investing.
When Should Teens Start Investing?
There's never been a better time for teen investors than today. The world is more interconnected than ever, and the global economy has changed drastically with it.
For one thing, international trade agreements allow teenagers an easy way to invest in companies that they otherwise wouldn't be able to get their hands on.
Additionally, social media allows them to gain a better understanding of world markets and get a feel for what's going on in other countries.
Types Of Investments For Teenagers
There are a few different types of investments that teen investors can make.
The Stock Market
One is the stock market, which has become globalized and teen-friendly in recent years. It's easy to be invested via social media without understanding what you're actually getting into; this makes it riskier for teen investors who don't understand how trading works.
Investment Club
Another option is an investment club, where teen investors get together to pool their money and make investments.
The reason why this is so popular is that teen investors can learn how to invest from other teen investors, and it's also a great way for them to teach their peers the basics.
Online Investing Platforms
There are now online investing platforms that allow teen investors aged 18 years or older in order to access stocks without having any money of their own.
However, they're likely to be limited to what they can invest in, and teen investors may not feel comfortable with a platform that is owned by adults.
Peer to Peer
And finally, peer-to-peer lending lets teens invest in people's debt via the internet--not all teen lenders use this method of investing because it can be complicated if you don't understand how loans work.
All four teen investment opportunities require some amount of research before committing to them--no matter what type the teen decides on, different scenarios and risks need to be considered.
Start a conversation about money
The teen years are a time of discovery and exploration. It's about learning who you are, what your passions are, and how the world works.
For many teens, these explorations extend to discussing their thoughts on money as well--whether they're good with it or not so much.
Ages 13-18 is an important age period to start investing in a teen's financial future.
The teen years are a time of discovery and exploration. It's about learning who you are, what your passions are, and how the world works.
For many teens, these explorations extend to discussing their thoughts on money as well--whether they're good with it or not so much.
Find out what they're interested in
If teen investors know what they want to invest in, it will be easier for them to figure out which platform is best.
Teenagers can use their time and money wisely through investing--and parents should encourage this by starting the conversation about teen investments early on.
The earlier a teen starts investing, the more likely they are to succeed.
Parents can help teen investors by teaching them what to look out for and how loans work--this will make the teen's first experience with investing a successful one.
Basic Advice
Start with a small goal
Start with a small goal and gradually work your way up as you gain more experience - teen investors should start with a goal of £300 or lower.
Rapid growth is not healthy
Don't make your teen's first investment be in something that will grow rapidly--that doesn't teach them how to manage risk and it can lead to losses if the asset falls before they have time to sell.
Learn about the company's history and how it invests money before committing to anything.
Before committing to anything, teen investors should do their research and know who they're investing in.
Reduce the level of risk
Buy stocks that are less volatile if you want to limit risk.
It's not always about the highest return. Teenagers should buy stocks with lower volatility if they want to limit risk and still earn a decent return on their investment.
Watch out for commissions when trading teen investments online. Oftentimes the commission prices can be hidden. You may not be aware of the price until after you've made a trade.
It's important that teen investors understand what brokerage firms are required by law in order to conduct transactions
Online investing can be risky, especially because of how quickly prices change, so teen investors have to beware of any charges
If your teen is going for something with more stability than the stock market has historically provided, consider buying stocks with low volatility instead of high volatility or metal commodities (including
And finally, don't risk what you can afford--don't invest more than 20% of what you have saved or earn in a teen investment account.
Use a diversified portfolio strategy that includes both stocks and bonds
When you're first starting out with teen investing, a diversified portfolio strategy is the way to go. This means that for every £1000 in your teen's account, at least 20% should be invested in stocks and 80% should be invested in bonds.
The great thing about this approach is it provides some stability because while stocks are riskier, they also have the potential for higher returns.
Bonds are less risky but don't grow as fast. The teen can always adjust their portfolio strategy once they start to become savvier about investing in a teen investment account.
The Future
Get them excited about investing by showing them how much money they can make in the future if they continue saving today. This leads us nicely onto compounding:
What is compounding?
Compound interest occurs when you are paid for the money that your account has earned in addition to what it originally grew with.
The benefits of teaching them all about compounding are that they will have an idea of what to expect when they start investing.
Compounding can really boost your teen's investment returns significantly, so it is important for them to know about this aspect of teen investments as soon as possible.
You could even show them the difference in their balance between compound interest and no compound interest by using a teen savings calculator.
The teen savings calculators might be a great way to show them what they can expect if they invest in stocks, bonds or even just simple bank accounts.
No matter which type of account you choose for your teen it is important that they know about the different types of accounts and how compound interest works with each one.
Investing teen's money in a bank account will allow them to have access to their funds, which may be necessary when they need it for school or other purposes.
Create a budget and stick to it
Your teen's first step to getting started is creating a budget. This will help them make sure they are spending their money wisely and know how much they have for spending on entertainment, transportation, or any other expenses.
Budgeting is as easy as dividing the amount of cash you can afford into what types of expenses you plan to spend it on.
Talk about how you make your own investments decisions
When talking to your teen about investing, make sure you talk about the decisions that have led you to invest in a certain way.
If they ask questions and seem interested, start on a small scale with investments like stocks or mutual funds. Be patient while waiting for results since it can take months before seeing any growth from investments of this type.
If the teen is not interested in investing, take a look at your own financial situation.
There are plenty of investments that do not require much risk on behalf of the teen if they're still young and have some years before retirement.
The best way to get a teen started with personal finance is by talking about it openly when they are young.
If you make investing the norm in your household, they'll be more likely to think it's something they should be doing too
Most teens don't know how to invest their money and if parents want them engaged with personal finance issues, start early by talking about investments at a younger age.
Allowing teen investment is an excellent way to get them started on the right path.
The teen years are a time of immense growth.
Many teens start thinking about their future and what they want it to look like, but may not know how to invest money in order for that dream to become a reality.
Share Stories
Share stories from when you were younger about what made you invest in something or not invest at all.
Share what you know about teen investing and how they can get started.
Discuss topics like:
- what are the best ways to invest for a teen's future?
- How does teen investing work in general?
- What is a smart investment as a teenager?
- What teens should be thinking about when it comes to investing
- What are some teen investment opportunities?
- How do you know if your teen is ready for teen investing?
Parents need to make sure that they have a conversation with their teens about this topic. It's important that kids understand the importance of starting early and how it can help them in the future.
Also, parents should talk with their teen about what they want to do in life and how investment can help them achieve those goals - then work together on an investment plan that will meet the teen's needs.
Wrapping Up
We hope this article has been helpful in providing you with some practical ideas for getting your teens to start investing. The most important thing is that the market motivates them and they’re having fun doing it!
So, make sure to take advantage of every opportunity you can find to help teach your children about money management skills early on.
And don't forget to have a conversation with them about how much more difficult financial decisions will be once they're out on their own!
Talk openly now so there's less stress later.