Time gives teens a competitive edge advantage over adult novice investors.
Warren Buffett has even reportedly said one of the best decisions is deciding to start investing at just 11 years old. Compounding is such a force because of its impact over time.
Teens are able to tap into the power of compounding work for a longer period, due to their low load of responsibility which could make them more financially healthy at the time of their retirement.
Young millennials, gen z’ers and generation Alpha are proving to be interested in financial empowerment now more than ever. have more economic power than any generation that preceded them. For millennials and gen z, 31% started investing before 21, while only 9% of baby boomers and 14% of Gen X did the same.
If the teen in your life is interested in starting their investment journey, here are some tips you should pass along.
OPEN AN INTEREST-BEARING SAVINGS ACCOUNT
At this point, it’s not unreasonable for a young teen to have their own checking account, but a savings account should be established as well, particularly if they want to start investing. This is a great way to get them set up to actually have enough capital to begin investing.
INVEST IN ROTH IRA
Setting up a Roth IRA is a great introduction to investing for a young teen. A Roth IRA involves after-tax income, so, newly employed teenagers are great candidates for this investment model.
The entry-level jobs most teens hold at their age give them a low tax rate, too. Options like Vanguard, (which has a minimum investment of $1,000) Fidelity ($2,500 minimum investment) and Betterment are great starters.
CONSIDER INTRODUCING THEM TO STOCKS
Although risk is higher with index funds, young investors can afford to be more liberal. Encourage your teens to purchase shared stock in their favorite
Public is an effective option that makes it easy for young investors to purchase and watch their stocks, with low barrier to entry, minimal money no investing experience.