When your kids start growing into teenagers (sometimes also known as miniature adults), it might seem like your job is almost done, but the truth is this is when the real journey into adulthood starts. As parents, you can ease that journey and equip them for life by teaching your teens about money management and investing.
Money management is a vital part of life, and when you can get your teenagers to master this from a young age, you will set them up for life. In addition, your teen’s ability to manage money will affect every aspect of their life. Finally, it will ensure they become responsible adults less likely to get into debt.
When you begin to teach your kids about money management, ensure you also elaborate on the fundamentals of investing. That’s why we have detailed the five main benefits of investing as a teenager below:
The Power of Compound Interest and Long-Term Investing
When you start to teach your teens about investing, one of the things you will come across is the ability to earn money on the amount you have invested over time. This is called the power of compound interest, mainly seen in long-term investments.
If you invest in the stock market early, you will have more time to learn about this and grow your wealth over a long period. This is because when you invest, the amount you earn is compound interest, which continues to grow over a long period when it stays in the account.
As most teenagers have less responsibility than adults they are more likely to grow their wealth via early investments, which will increase over the years.
Investing in the Stock Market Helps Teens Learn Money Management
As a teenager investing in stocks, you can learn the values of money management too, which will serve you for life. Investing in the stock market is an art of its own. It requires research, patience, and a whole lot of interest.
Whether investing in stocks and shares via a savings or specialized investment account, you must follow the following money management techniques:
- Learn how the stock market works and study share prices to decide where to invest money.
- Learn about the risks associated with investments, as the value of your shares can go up and down.
- Set your expectations and remind yourself why you are investing.
- Decide on your budget and stick to it.
Investing in the Stock Market Helps Teens Develop a Strong Work Ethic
Investing in the stock market is a slow game. It takes quite some time to notice a substantial return, but it is still worth doing. When teenagers start investing in the stock market, they will quickly learn that it takes a while to earn a substantial return. Investing a fixed amount of money every month will teach the value of dedication and sticking to something that has a long-term benefit.
Furthermore, when teens invest in the stock market, they learn how to stick to something that will serve them in the long run, thus teaching them a strong work ethic.
Here are some additional ways to teach your teenager to develop a strong work ethic when investing in the stock market.
- As you invest with your teen, explain that the stock markets go through volatile periods when it fluctuates in value.
- Once the stock market improves, explain to your teen that it is crucial to stick to investments and to keep on investing the same amount.
- Record any fluctuations in the stock value you have invested and share any insights you have gained with your teen.
- Encourage your teen to share their thoughts about the stock market, too, so they can develop the confidence to keep at it.
Investing in the Stock Market Can Help Teens Achieve Their Financial Goals
When your teen starts to understand the inner workings of the stock market, they will have the confidence to keep investing and reach their financial goals. Teenagers have so much time to build their wealth when they invest early. Once they get into the habit of saving a set amount, it will be easy for them to keep this going when they become an adult who earns a steady income.
Below are some examples of financial goals teens can achieve by investing in the stock market:
- Buying their first home.
- Paying off their college fees.
- Building enough generational wealth to pass down to children.
- Investing in rental properties and gaining residual income.
Tips for Teenagers Who Want to Start Investing in the Stock Market
Suppose your teen expresses an interest in investing in the stock market, you can set up a custodial account on their behalf, and you, the parent, can manage it. You can get the best out of investing in many ways, and that is by investing consistently over a long period.
Below are some additional tips to help your teen make the most of investing in the stock market:
- Stay on top of stock market news and updates to understand which stock will perform well.
- Invest in different stocks and shares in various foreign markets. Don’t just invest in US markets you are familiar with; try to invest in stocks and shares in other high-performing markets worldwide.
- Keep an eye on your costs, and don’t exceed your budget.
- Be okay with drops because the stock market fluctuates.
- Invest in many different stock industries such as health, real estate, finance, etc.
In closing, by teaching your teen about investing in the stock market, they can gain essential life skills that will serve them well into adulthood. For example, your teen will learn to develop a strong work ethic, manage their finances, and build generational wealth. In addition, when your teens are trained to invest in the stock market patiently, they will understand how to live on a fixed budget and save money for retirement. Lastly, teens who invest are highly likely to become adults who are good savers.