Invest Money As a Teenager
Congratulations! This is the correct time to plan your financial future. Teenagers who are smart enough to invest their money should learn about responsible money habits. If you are a teen, you can start with the basics, and gradually, you may learn the art of financial planning, saving, and
investing. Investing is one of the crucial skills anyone should learn to obtain a tremendous head start compared to their peers. Early investing can have huge benefits. Yes, you can invest though you are under 18 Most of the teenagers think they cannot begin investing money until they become an adult. There are many success stories about people who have become great entrepreneurs in their teenage. Catherine Cook is an 18 years old, famous person in online social networking. She invests money in her own business.
She is engaged in assisting teenagers to establish their novel trades, using her website called MyYearBook.com. Catherine has made her money through advertising revenue from her website. She owned $30 million in funds as a teenager.
Earning your own money
Most teenagers do not merely rely on the allowances given by their parents. At a certain point, they start earning money on their own. There are so many methods to earn money. First, you have to focus on the opportunities around you and grab the most profitable one. There are many companies and shops which are willing to outsource some of their services. After school, you can do a part-time job and make your own money. Those earning will make you a financially independent person. But education is the most important part of every teenager. Hence, you should only work as long as it doesn’t affect your education. Parents should also give their attention to children’s desire of earning money at their young age. They should encourage their children to be financially independent.
Discuss with a parent or trusted adult
Before investing money, it is better if you discuss your ideas with an adult whom you can trust. Not all adults are knowledgeable about personal finance. Thus choose an adult whom you trust, to help you manage your investments wisely. Other than that, you can do research about investments through the internet on your own. At this stage, you can open a bank account. If you are a teen, there are some benefits of having an own bank account to your name. There are specific types of accounts that can be established by a parent or guardian. These types of accounts can help save for long term goals such as education or retirement. The most common account type is called a custodial account.
How to Invest
There is various type of investing opportunities all over the world. Investing is not an easy thing and no one expects a teen to grow into a billionaire before they turn 20. But when you start investing as a teen, you can learn lessons that only become more useful as you grow up.
The hand on experience about dealing with money will encourage teenagers to magnify the amount of money they have. There are certain successful methods to invest your money in a secure way. Those are:
- Micro saving Apps
Micro-saving apps are the perfect gateway to enter into the world of financial responsibility. These apps round-up teen’s expenses and automatically invest the difference in the stock market. As an example, when a teen buys a coffee for $5.50, the micro saving app will round it up to $6 and invest $0.50 in the stock market.
- Invest in the stock market
Professional investors are doing market surveys and research before choosing a stock to buy. They deeply go through the organization’s history, financial background, and future forecasting about stock prices.
As a young person, you have the energy to study the stock market. Initially, you can invest a little amount in stocks based on your preferences. You can select a company that you are interested in. After picking the stocks, you should check the stock’s performance of that company, and understand the reasons for the fluctuation of stock value.
- Investing in Bonds
Investing in bonds is a great option for teenagers. A bond is a debt issued by an organization to investors. Bonds can be issued by governments, municipalities, or companies. Eventually, the loan amount and interest will be repaid to the investor. Bonds have a certain amount of risk as an investor doesn’t know the likelihood of repayment of money by the
borrower. But some types of bonds are backed by the government. Especially, U.S. government bonds are considered as safest investments.
If you are invested in municipal bonds, it is beneficial because the interest paid on the money you invested is tax-free. Therefore, it is a huge benefit for a teenager.
- Start a small business
Most teenagers do part-time works after school. Thus if a teen has any amount of money left after spending on their wants and needs, one interesting approach is to allow the teen to invest them directly in a business of their own.
The basis of this method is to take some of the money earned from that part-time job during school or over school breaks and use a portion of the funds to set up a business that aligns with the teenager’s passions and interests.
In this stage, teens will get knowledge about how to invest their money in a beneficial way, how to attract customers, and how to build a strong industrial relationship. Parents should give support to their children to initiate their
own business. Because some people may try to take advantage of young, impressionable teenagers. There are many opportunities in society. Teach your child to grab those opportunities at the correct time. Entrepreneurship is the best method to win the business world.
Failure is the door to success. Therefore, don’t stop this journey until your name become a brand name.
- Open Roth IRA
IRAs are retirement accounts that provide valuable tax benefits, including tax-free growth on your investments. There are two types of Individual Retirement Account (IRA), traditional IRA and Roth IRA. These two have different features.
There is no minimum age limit to open a Roth IRA. The condition is that contributions to a Roth IRA must be from eligible earned income, and contributions cannot exceed the annual income of the investor. You must have compensation from work. The maximum amount you can contribute to a Roth IRA in a year is your income from work or $6,000 whichever is less. But people who are older than 50 years can invest up to $7,000. In Roth IRA, you have to pay taxes on the income now,
but you don’t have to pay taxes when you withdraw it later.
The traditional IRA gives you a tax deduction, but you have to pay taxes later when you withdraw money from the account.
- Open high yield saving account
Teens should also save some money in their savings accounts. Because saving money in savings accounts gives an attractive annual interest. There are several online savings applications which are provided by bankers. These online savings accounts are designed to encourage
savings and do not allow you to withdraw money using an ATM card.
Conclusion Investing as a teenager has never been easier.it has lots of
milestones. As you are under age 19, you may need assistance from a parent or guardian. To be successful, you have to use every single day as an opportunity to develop, to be superior, to get a little bit closer to your objectives. The best part is, the more you achieve, the more you’ll want to do, and the higher you’ll want to reach. So as long as you have the hunger for
success, you will always have the power within you to achieve it.