Best Investment for Teens – 9 Ways to Get Your Teens to Invest
May 15, 2021
Learning how to invest properly is crucial.
Teens have to learn to invest properly so that they’re prepared to start growing their overall net worth when they grow older. The best way to teach them how to invest is to let them experiment with some investments for teens.
This article is going to go over several of the best investment for teens. This will help you teach your teen how to invest properly without a ton of risk.
Get Them to Open a Checking Account
The best thing that you can do to begin getting your teen comfortable with investing is to allow them to open a checking account.
This teaches them responsibility for their personal finance because they’ll be using checks and debit cards, and they’ll need to learn how to track their checking account balance.
Have Them Open Up a Savings Account
You may not think that opening a savings account too is a great idea, but having a savings account is a good way to get started with investing without having to research the stock exchange or have great knowledge about the stock market.
Plus, many companies require a minimum before you can invest. To begin investing, it’s best to keep all the needed money in one place.
Many teens will open up their savings account with the bank that their parents have their accounts at. This can make life easier, but other options are available.
One of the main benefits you’ll notice when you support your teenager’s decision to pick an online bank for their savings account is that they can’t make withdrawals very easily.
This prevents your young investor from making impulse buys, which can not only derail their investment plans but cause regrets too.
Use a Roth IRA to Teach Your Teen How to Invest
A great way for your teen to learn how to invest is by starting a Roth IRA account. To begin investing in a Roth IRA, you have to use earned income. So, teens need to work a job to invest in a Roth IRA.
The jobs that most teens have when they’re in high school typically give them low tax rates. These low tax rates make the Roth IRA account the perfect investment for teens to start saving for their future.
Have Them Try Index Funds
Teens love to have instant gratification, so learning about investing isn’t always appealing. To keep them engaged, let them have control over their investments. Tech stocks can be fascinating for most teens, but index funds provide a few more benefits.
By investing in one company, you’ll feel every low and high that the company goes through. So, it’s important that you push your teen to utilize index funds as well.
They’ll still get the exposure of their favorite companies; they just won’t be tied to a single investment. This is very important and can be a big difference-maker, not just in their success but in their investing attitude.
Lightly Touch Stocks
There’s a lot more risk involved with investing in an individual stock than a portfolio of index funds. However, there’s more appeal to owning a share of their favorite company.
So, before you let your teen invest in an individual stock, it’s crucial that you discuss with them the importance of researching stocks.
People gain more awareness of what’s happening with the economy when they invest regularly. When your teen owns a share in a company, they need to keep up to date to help stay above any problems that might arise.
An issue that your teen might run into when investing in a company is that their high-priced stocks. It’s a great idea to discuss with your teen how they’re planning to save up the cash so they can invest in the company of their choosing.
Help Them Invest in a Local Business
To have a far more exciting investment, consider investing some money into a business. However, being a parent, you need to be careful. You have to ensure that the business your teen wants to invest in isn’t just taking advantage of them.
It doesn’t matter if they want to start up their own business or research a business owned by friends or family members.
Investing in a local business makes the investment more personal and is a great way for your teen to quickly learn about investing and businesses.
Teach About CDs
Certificates of Deposits aren’t as enticing to teens as stock market investments. But they aren’t as risky either, which is exactly why you should encourage your teen to invest in CDs.
What makes CDs a great investment for teens is that they’re FDIC insured. Having this insurance gives a sense of peace to cautious teens.
There are several terms that you can select from when acquiring a CD. The longer the term, the higher the rate of return is.
This is a great lesson for teens, especially because it allows them to watch how investing their money for long periods of time will allow them to earn more but removing money early will penalize them.
Open a Traditional IRA
If your teen has had a job and earned income, they can open a Traditional IRA. Teens are allowed to invest $5,500 each year into a Traditional IRA account.
The money will then be placed into a brokerage account, making it so they can control their own money and invest it.
Set Up a UTMA Account
UTMA accounts, or Uniform Transfers to Minors Accounts, are good options if you’re seeking to help your teen begin investing. You can set them up using a variety of investment account types.
Because of this, you can try out a few different investment types, and your teen will gain experience and financial literacy with each type of investment. They can also use the money for any desired purpose (i.e., education).