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Source:investorjunkie.com

6 Best Ways to Invest Money as a Teenager

October 10, 2020
Business

Most people have always thought of investing as a mysterious and serious activity reserved only for adults. Teenagers and investments? Not really a match. Well, guess what? You were wrong. Yes – money is a serious matter and we all should be cautious with it, but it doesn’t mean that young individuals can’t be involved in improving their financial status as well.
Actually – the sooner you start with it, the better. Before you enter adulthood, just imagine how much your finances might progress if you start thinking about it when you’re still a minor. If we choose to play wisely, everything we invest might benefit us even more in a couple of years.  Whether it’s a special fundraising account for future educational endeavors or some of the popular programs offered to young people today, the opportunities exist and there are plenty of them. All we need is a little bit more information.

Today we’re going to point out some of the best ways to start preparing for the future even before you’re 18. This might also be valuable to all the parents out there who want to point their teenagers in the right direction.

1. Opening a custodial account

Source:youtube

This type of account is specially created for minors by a parent or a custodian. Its purpose is to provide financial support for educational and monetary benefits to minors. Of course, the money can be used for any teenage need, but the parents are those who make decisions concerning the account until the child reaches age 18 or 21 (depending on the state).

These can be opened via special platforms such as Loved.com without any costs – the only thing you need to do is keep loading more money on it. When the child reaches the age of majority, the parent has no ownership of the account anymore – the full control over it belongs to the kid. That’s why you should make the child know the purpose of this and use it wisely and with responsibility.

2. Stock market

Source:tehrantimes.com

Numerous teens simply love the idea of owning a share in their favorite company. But before you allow your teenager to get into the stock business, first you need to teach them how to research stocks. Teens already know where they want to own a share and sometimes their favorite companies have high-prices stocks.

You should advise them to save enough money beforehand – and this can also be another great opportunity for a teenager to learn how to save some cash without spending it right away. Usually, those favorites among companies are the ones that have proven the increased payouts. That means that they can start receiving income on an annual basis after they sell the stock successfully.

3. Traditional IRAs and Roth IRAs for Minors

Source:investorjunkie.com

Traditional IRA can be funded by anyone with an income. That means that even your child who has a summer job or a part-time job can fund one. It has allowed a great benefit – a tax deduction. Teenagers can invest up to $5.500 every year and their money can be placed into a brokerage account. The Roth IRA is the perfect example of saving for the future and one of the best ways for securing some cash they have been keeping safe.

It has been used mostly as a retirement saving, but you (or your kids, in case you are a parent) can be as imaginative as you wish. Also, before you decide to set up a Roth IRA, you need to have an actual job. The main difference between these two IRAs is that with a Roth IRA you can withdraw your contributions at any time after five years and these will be free from tax and penalties since there was already a fee paid for them.

4. Learn to invest in a business

Source:nerdwallet.com

It’s crucial to do serious research with your teenager on the business background that you’re counting on. The endeavors you’re considering shouldn’t (and mustn’t) be shady, but sustainable. Sometimes it isn’t about what we love, but what pays off. Don’t be afraid to give them your opinion in case you have more experience with this, as they might be confused or hesitant.

It’s true that the best way of learning how to do this properly is through making mistakes, but this doesn’t mean that you should set yourself up for failure by taking a risk with a non-profitable business. Take some time and make sure you have a good idea before you start an adventure like this.

5. Microsavings apps

Source:standard.co.uk

These apps have been a real revelation recently and have intrigued numerous adolescents, but also all other generations due to its handy features. Their main purpose would probably be stepping into the world of financial responsibility and getting used to putting cash aside.

Wondering what’s the secret? It’s quite simple – each time you buy something, an app like this will automatically round up the price you paid and transfer the difference in the stock market. For example, let’s say you’re buying a juice that costs $4.50 – the price will be rounded up to $5 and the difference of $0.50 will be saved. It might look like an insignificant amount, but you’ll see it growing day by day.

6. Start a small business

Source:mortgages.tips

Nowadays, numerous teens are getting rich by starting their small business. It may be through helping in the neighborhood or launching a clothing line or simply selling some products or clothes online or in stores or stands. Whatever it is, you should learn to put money into your own business rather than spending your savings.

This can be rather beneficial since it’s teaching children how to get what they need in order to start a job, how to deal with expenses and set up the prices, and gives them many more tips on entrepreneurship.

This is only a tiny piece of the whole spectrum of ideas. For making serious and significant money decisions, the best option would be to seek guidance if you’re a teenager who’s just starting from the scratch or to assist your child with some handy ideas in case you’re a parent. Also, when thinking about investing, you must determine how much you want to be engaged in the whole process and what’s your risk tolerance.

The bottom line should be – play it safe but don’t wait to become an adult before you enroll in the process. Start learning your money lessons and make your incomes grow before you know it!


Tags:

  • Business
  • custodial account
  • invest money
  • IRAs
  • Microsavings apps
  • small business
  • Stock Market
  • Teenager

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