We all know that effective personal finance management skills are important to an individual’s success. For teenagers to become responsible adults when they become independent – they must learn about money transactions from the earliest period and practice them through certain investments. Of course, they should do it with the unselfish help of their parents. We will give you some tips when it comes to investing money for teenagers.
Teenagers And Money – Can That Function?
Teenagers love to spend. There is no limit when money comes from the parent’s wallet. But when a limited amount of money is available to them – they will think about how they will distribute it. Banks widely offer to open accounts for young people who are only 16 years old. Bankers explain that managing money and expenses is an important part of growing up and educating young people. They also claim that teenagers who have their accounts get acquainted with the functioning of the banking system, payment operations, online payments, and security in high school – unlike their peers who open their first accounts. when they get hired. The questions that often bother teenagers and their parents are: When to open the first account for a child? And are young people ready for this kind of responsibility?
Learning About the Value of Money
Your child is a teenager who wants to know more about money and money management. That’s not a bad thing at all. Basic knowledge about the value of money should be instilled in children from the earliest period. But, when they come to a period when they are halfway between a child and the world of adults – it can be a real challenge. However, don’t be scared right away – because it can often be easier than you expected. Teenagers will probably accept more if you speak under the conditions of their needs. Before you start instilling in them the value of money and you run the risk of turning out to be a grumbler – you must first understand where they are spending their money. You can start this conversation by talking about their needs – and thus drawing them into your conversation.
Invest, Don’t Spend
Implanting the long-term value of investing is a lesson that your teens will be grateful for – especially when they realize that their salary will not create wealth for them. As a parent, you can explain to them the importance of investing – by pointing out how they enjoy everyday needs. For example, how much you repay the house now will be a fortune for your children when they become its heirs. A simple calculation can also show your children that by investing 10% of their income with 10% of turnover – their wealth will be higher than the annual salary.
Include Kids In Your Daily Financial Tasks
Parents should include their children in financial tasks from an early age. That way, these things won’t be unknown to them when they get older. Let them write a check, not to spend it for themselves – but to pay the bills. We are so used to managing money – that we have forgotten that our children may not be able to distinguish between savings and accounts. Therefore, it is recommended that you introduce your teenagers to paying bills, balancing checks, placing deposits, and withdrawing money from the bank – so that they have a closer idea of how money transactions work.
Teach Them How To Budget
Good money management starts with a budget. To get your teens on track, give them a monthly budget. Predetermined cash inflows and outflows will help your children gain a sense of budgeting. So the more they spend – the less they have and vice versa. By allowing them to estimate the money in their wallets as well as the period needed to buy something – they will also learn to beware of excessive spending.
Money Investing Tips For Teenagers
The more teenagers understand what money is – the more ready they will be for the real world. Therefore, they should be encouraged to be actively involved in financial tasks, and thus contribute something with their investments. In this way, we are educating future entrepreneurs. Sometimes, what they learn in practice through their work or investment – can be more important than what they learn in class. Therefore, we bring you 5 money investing tips for teenagers.
1. Practicing Cash Investments By Using A Return On Investment Calculator
One of the most important things that teens need to know – is a clear understanding of the benefits of time and market movements. If you’re a teenager who wants to invest – don’t immediately run into the first thing that seems attractive to you. On the contrary, give yourself time to understand market trends and master certain financial procedures. Therefore, using a return on investment calculator is a great source to start with. Namely, such tools allow you to see several different options when investing. You can adjust parameters such as the amount you are willing to invest in a month – or for example, the number of years you are willing to invest and the expected rate of interest or return. This powerful tool can help teenagers a lot because they will master different ways to accumulate certain, even larger amounts of money.
2. Trade And Purchase Of Shares
Although most people think that buying stocks is a risky business especially for beginners – in a way, it can be a great financial practice for teenagers. Of course, we don’t mean those fabulously expensive stocks. Just start by investing small capital in stocks – until you get used to this business and gain experience and routine. Therefore, buying and trading stocks don’t have to be a bad idea at all when it comes to teen investments. If nothing else, you will learn more about the reasons for the rise or fall of certain stocks – as well as monitoring the movements in the financial market. You can enter small sums, for example, 10-15 dollars – and you will see what happens to your money. Have you made a smart move, or do you still have a lot to learn? What we have to mention when it comes to buying stocks – is the fact that you have to be 18 years old to become a buyer or seller. According to Loved.com, investment accounts for kids under 18 is not possible. Therefore, for all under the age of 18 – parents will need to be authorized persons to buy or sell your shares. This can be simplified by setting up a custodial account.
3. Open A Savings Account
Certainly, since we have already mentioned that teenagers like to spend – then it is not wise to put all their money into stocks because it can cost them to be left with nothing. That is why it is always advisable to keep part of the money in cash – more precisely in the account. Or even more precisely – on a savings account. This way, you will also increase your capital – and along the way, you will learn how the system of interest rates on savings works. Today, in the age of the internet – you can find an adequate offer with favorable interest rates on your savings.
4. Open The Roth IRA
Although teenagers don’t think about the years to come at all, let alone the pension fund – the influence of parents should exist and direct them in that direction as well. Teenagers need to know how important savings really are for retirement. One of the best ways to do something like this is to start a Roth IRA for teens. Every investment in this account grows tax-free until you are 59 years old when you can withdraw funds and enjoy a peaceful mature age.
5. Try Yourself At Entrepreneurship
You may be one of those who do not want to invest their money in stocks and similar ventures – but investing in your own business is a much closer idea to you. You certainly know that especially in the last decade or two – many teenagers have gained almost tremendous wealth by cashing in on some of their entrepreneurial ideas. With a good business plan, and a little smart investment – who knows? Tomorrow, maybe you can become one successful example too.