"Make good choices" is a phrase my wife says to our kids every time they leave the house. Many of you may say the same thing or some variation of it, or you heard it from your parents. It covers everything and is a much nicer way of saying, "Don't do something stupid."
One of the best choices you can make as a teenager is to start investing, because time is one of the greatest gifts an investor has. The longer the time horizon you have to put your money to work, the greater the opportunity for your money to grow with a disciplined investment strategy. But can you really start investing as a teenager? Yes, you can -- and it's a lot easier than you think.
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Teens can start investing on their own at 18
To invest in the stock market on your own, without a parent or guardian account, you have to be at least 18 years old in most cases. A lot of 18 year olds are getting ready for college and probably working summer jobs to help offset those college expenses. They could take some of their summer earnings, for example, and invest it in stocks.
Interest in investing among teens spiked this year due primarily to the GameStop short squeeze -- this frenzy of market activity drove the share price of the video game retailer from just $17 to over $500. According to a survey by Wells Fargo, 45% of teenage respondents said they were more interested in investing due to the GameStop situation with their interest fueled by posts on social media. The Wells Fargo study also found that 75% of teens surveyed were eager to learn more about investing.
For teens who are 18 and over, investing is easier than ever through online investing platforms like Robinhood and Fidelity, to name a few, which have no fees or commissions and no minimum balance requirements. Teenagers can open an account in a few minutes and invest any amount they want, whether that's $20, $50, $100, or more -- and they can add funds and build up their positions over time. Starting small is a good way to learn the ropes without much risk.
And starting early, even with a small initial investment, is the key to building long-term wealth. If you started with a $100 investment and added $50 per month to that portfolio, a 10% annual return would leave you with over $100,000 after 30 years.
Teens under 18 can also get started
In May, Fidelity Investments launched a Fidelity Youth Account, a brokerage account designed for 13 to 17 year olds. While a parent or guardian must establish the account for the teen, the account will be set up with the child's own name and user info. They will have access to educational content, investing tools, and a brokerage platform where they can get hands-on experience investing through this no-fee, no-minimum platform. It also includes a debit card tied to the account with ATM fees reimbursed and a cash sweep option for uninvested funds. While it's in the teen's name, a parent or guardian can see all of the transactions.
This is the first brokerage account created specifically for this age group, according to Fidelity, but other brokerages allow parents or guardians to open up a custodial account for their teens. In this case, the account is in the parent or guardian's name, and they must approve all transactions. Similarly, a parent or guardian can open up a custodial IRA for their teen to help them start saving for retirement.
So not only are teens becoming more interested in investing, but there are also a growing number of options for them to start their investing journeys. There is a lot to learn, but the sooner you start, the better off you're likely to be in the long run.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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July 18, 2021 at 08:30PM
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Can You Really Start Investing as a Teenager? - The Motley Fool
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