Tips for Getting Your Teen Started in Investing

Teenagers have a big advantage when it comes to investing — their age means they have plenty of time for their investments to grow. Here are some tips that may give your teen a solid financial start so they can make the most of their money. 

For more personalized investment advice, reach out to Farm Bureau to help as you and your teen explore their investing options. 

How Old Do You Have to Be to Invest?

In terms of when you can start investing, your teen typically needs to be 18 years old to open a brokerage account. But as a parent, you can open a joint brokerage account with your teen if they are younger. Having a joint account also gives you the ability to supervise the account, which can put some valuable guardrails on how your teen manages their investments. 

You and your teen can add money from gifts or other sources to this account. Your teen can take ownership of this account at age 18 or 21, depending on state laws and financial institution regulations. 

How Can You Invest in Roth IRAs as a Teenager?

Along with a joint brokerage account with a parent or another adult, teens can open a custodial Roth individual retirement account (IRA) if they have earned income. Roth IRAs can include stocks, bonds, mutual funds, and other investments. 

Roth IRAs can be a good choice for teens because the money grows tax-free. Even though Roth IRAs are designed for retirement savings, there can be ways to use that money for other reasons, like education expenses.

The Benefits of Investing as a Teenager

Along with the long-term time horizon teens have for their investments to grow, investing can help teens learn first-hand about finances and economics. They can dig into companies they’re interested in and find out what makes them successful in the industry.

You may want to encourage your teen to buy a small amount of stock in a few companies that matter to them, and to round out their investments with mutual funds. The individual stocks can build their interest in investing, while the mutual funds diversify their portfolio.

The Downsides of Investing as a Teenager

Investing always has risks, and it’s important that teens learn about the tradeoff between risks and rewards. While younger people may be able to accept more risk, because their investments have more time to recover, investing helps teens figure out their tolerance for risk. Teens who aren’t comfortable with a lot of risk can make investment choices that more closely align with them like mutual funds/ETFs or high-yield savings accounts verses individual stocks. 

When teens start investing, it’s important for them to learn to balance their long-term goals with short- and medium-term goals – like saving for education and budgeting during college. Teens may have a lot of enthusiasm for investing but understanding the difference between investing for goals that are well in the future vs. money that they’ll need in the next few years is critical for their investing success.

A Pro Can Guide You and Your Teen

No matter what age you are, it can help to turn to a professional for financial planning advice. Whether you’d like guidance for yourself, your teen or both, Farm Bureau can help. Reach out today to find an agent or financial advisor.