“If only I had known this when I was younger.”
This is a phrase wistfully uttered by most of us as we grow older, usually in tandem with missed opportunities. There are millions of people around the world cursing their younger selves for not investing in ventures like Bitcoin which have made early investors tremendously wealthy. Personal finance and personal investments are rarely talked about in even finance-related degrees and courses, and are certainly not taught to students of other sciences or arts. So if you want to teach your children about personal finances and investments, you need to start young.
While the concept of savings accounts is easy enough to grasp, it is an avenue that has relatively lower returns. Becoming wealthy requires you to invest your money wisely - no one ever became rich by earning a monthly salary and striving to save a portion. Starting to invest as a teenager teaches them the importance of earning their own money, as well as the value of money.
Here are some tips on how to get teenagers interested about investing:
1. Give them an allowance
Giving teenagers their own money to save or invest teaches them about financial responsibility. Let them invest their allowances and grow their money so that they can buy whatever they want. Perhaps you can even match the extra amount they manage to make to further motivate them towards investing their money.
2. Tell them success stories
Nothing motivates teenagers than by showing them an example of something they can aspire to. Educate them about the life stories of people who started with nothing only to create empires through smart investing. There are countless thrilling books and movies made about finance and investment. Anecdotes about unique incidents like the Gamestop short squeeze by an internet community that brought a hedge fund to its knees would interest rebellious teenagers in particular, encouraging them to invest.
3. Teach them the basics
The sheer volume of the information available online might overwhelm teenagers and put them off the idea of investing. Sitting down with them and teaching them about the basics on how to save and how to invest is a good place to start, rather than letting them navigate the waters on their own from the get-go. Once you have shown them the ropes, let them save and/or invest on their own so that they can learn through trial and error.
4. Invest alongside them
Get them started by investing alongside them in their selected choices. Teenagers below the age of 18 are unable to open their own saving or investment accounts and would need your credentials to do so. Invest in their choice of avenues so that they can see the real-world consequences of doing so and not simply on a theoretical level.
5. Show them the stock market
Unfamiliarity with the stock market is rampant among even adults who are not actively involved in the finance industry. The stock market is filled with jargon and highly technical terms, but once that hurdle is overcome, the rest is easy enough to navigate provided you keep up to date on global and business affairs. Once your teenagers start to invest and make some money, there will be no holding them back.
6. Explain to them about Compound Interest
Compound interest is one way of seeing your money grow as time passes. Teenagers possess something that even no adult with years of investment experience possesses - time; time and compound interest are a match made in heaven, and is the perfect way to save and invest your money at the same time. Compound interest allows you to not only save your money but also accumulate interest over time. A single large investment when you are young can snowball into millions by the time you retire. These kinds of savings accounts work best when opened at a young age. Therefore, a teenager who invests early can reap the full benefits of compound interest throughout their lifetime - basically, a gift that keeps on giving.
Encouraging teeangers to save and invest at an early age instils in them good financial habits and aspirations towards financial growth. Helping teenagers to save and invest gives them a clear head start as they progress into their adult life. Most adults learn about personal finance and investment techniques far too late in life. If you had started investing in your teens, you would have not only learned invaluable information about personal finance but also created several streams of revenue to support your salaries and earnings later on in life.
It’s not enough to just encourage or motivate teenagers to invest money. Legally, you need to be at least eighteen years old to engage in any official financial transactions (opening accounts, trading etc.); therefore, you would need to create custodial accounts (or their equivalent) to allow your teenagers to invest, and most likely supply the initial capital as well.
Although your teenage years aren’t meant to be consumed by earning money (there’s a lifetime ahead to do that), it’s a good time to get a sneak peek about what the real world has in store for them. No one expects a teenager to invest and become a millionaire, earning your first few thousands is a remarkable achievement and one that should be strived towards.