Best ways to invest when you are young?

[james.hendrickson]

Hi Guys,

Okay, so I have been mulling this over. Lets say you are a teenager - 13 or 15, and you want to get started investing. What would be the best way to do this?

Obviously with the time value of money, you need to start investing as much as possible as early as possible to get the maximum return.

One possibility is to have your parents open up a custodial IRA, and have your parents put in any money you earn through odd jobs. Are there other good ways to invest if you are young?

[disneysteve]

One possibility is to have your parents open up a custodial IRA

This is exactly what we did with our daughter. We opened a custodial Roth for her when she was 17. After she turned 18, we converted to a regular account in her name. Her account is with Vanguard in a Target fund.

[bjl584]

when I was young and working my first job I didn't invest, but I was a saver. Most of the money that I earned as a teenager went to a savings account.

[kork13]

- Custodial Roth IRA in either a target date or S&P 500 index fund
- I-Bonds
- 529 plan
- Plain old savings account

Those would be my top options.

I personally had a savings account since I was 13 or 14. Taught me that I had a better option than risking my cash in the underwear drawer, and how to save up for bigger stuff.

[Fishindude77]

when I was young and working my first job I didn't invest, but I was a saver. Most of the money that I earned as a teenager went to a savings account.

I think if you can teach this, you've done well.
Investing will come with time.

[disneysteve]

when I was young and working my first job I didn't invest, but I was a saver. Most of the money that I earned as a teenager went to a savings account.

I think if you can teach this, you've done well.
Investing will come with time.

Most kids and teens don't have legit earned income, but if they do, I'd definitely encourage the IRA. Take full advantage of the tax benefit and compounding for 50 years. Just think how $1,000 invested tax-free 50 years ago would have grown by now.

[bjl584]

Most kids and teens don't have legit earned income, but if they do, I'd definitely encourage the IRA. Take full advantage of the tax benefit and compounding for 50 years. Just think how $1,000 invested tax-free 50 years ago would have grown by now.

I wish that my parents were more savvy with investing and would have set up something like this for me back when I was in high school.

My knowledge of investing was self taught and didn't happen until I was in my mid twenties.

[greenskeeper]

too young for an IRA or long term investment...that can start at 18 with hopefully a company 401k w/ matching

youngsters should be saving money in a liquid savings account so that they do not fall into the debt trap of credit cards or vehicle payments from the get go

When I lived at home with my parents until graduating college, I banked every other paycheck in savings, and then contributed to my 401k as soon as I turned 18.

[sv2007]

Hi Guys,

Okay, so I have been mulling this over. Lets say you are a teenager - 13 or 15, and you want to get started investing. What would be the best way to do this?

Obviously with the time value of money, you need to start investing as much as possible as early as possible to get the maximum return.

One possibility is to have your parents open up a custodial IRA, and have your parents put in any money you earn through odd jobs. Are there other good ways to invest if you are young?

The absolute best way is to invest in yourself when you're young. Put that money into improving yourself, the dividends are going to roll in for as long as you live.

[clatoden99]

This is an exciting question to answer as I was in a very similar position to you once.

I started investing on my own at a young age, and since there isn't much real-world investing experience that you can learn in school, (at any real level), the only way to do so is through experience. Unfortunately, regardless of how good you are, or how you lucky you get in the beginning, you WILL have an expensive learning experience at some point. Here are a few ideas that you should look into:

1) Read. Absorb as much information as possible. Understand what is going on in the world and relate that information to what you see in your own life, where applicable. At first, don't try to solve for concepts that are over your head. The investment world is far too big to master everything and ultimately you will be better off by really understanding what you already have some understanding of. For example, if you like gadgets, read the WSJ technology section for macro and company specific news and elate it to your own life. What are you seeing? What trends are developing? What companies are coming out with new products and based on your experience as a consumer, will those products be successful? This is a complicated way of saying "stick to what you know."

2) Socialize. Investing is inherently social, the only problem with this is that there is historically a large information asymmetry. Historically, my best performing investments were ideas that I received from my professional network of investors, then my friends' best investments were ideas they got from me, in other words we had a game of telephone going on. The good news is those walls are starting to break down and we are starting to see more democratization of investment knowledge via Harvest Exchange and other platforms. While you probably won't see the world's best investors sharing their proprietary models, you will see what they think, and how they view the world. Take this information, absorb it, and relate it to your own life and interests. You should also discuss with your fiends and networks who have a similar interest in investing. Again, Harvest Exchange (Harvest) is a good platform to do so.

3) Practice. LIke I mentioned at the beginning, learning to invest is expensive, but with new services out there it doesn't have to be. That's not to say you won't lose money from time to time, you absolutely will, but by practicing in a simulated environment you can learn a lot more about the way the market works and reacts to news. I recommend building a watchlist on yahoo finance or creating a model portfolio on Harvest Exchange. The model portfolio is a great way of simulating real world trading based on your ideas without actually risking your own money.

4) Start to think about how stocks as businesses that can be valued based on everything that you learned from the above suggestions. Don't overcomplicate this, as from my experience that is where people tend to run into problems. A stock is nothing more than a percentage ownership in a business, and businesses are driven by simple metrics - sales, expenses, growth etc. Stick to what you know and keep things simple.

To sum this all up, the best way to learn is to consume knowledge, socialize your viewpoints with others, and practice. I hope this helps...

[moneybags]

too young for an IRA or long term investment...that can start at 18 with hopefully a company 401k w/ matching
.

Never too young for an IRA in my opinion. My kids have had Roth IRAs since they were infants (they worked). The great thing about the accounts is that there is the option to take the money out to buy a home or pay for college, but there is also incentive to leave the money in the account. As teens, they've added money and/or I've added money based on their earnings. That said, neither of them are interested in learning how to invest, but I do go over their accounts with them and they are good at saving.

[greenskeeper]

Never too young for an IRA in my opinion. My kids have had Roth IRAs since they were infants (they worked). The great thing about the accounts is that there is the option to take the money out to buy a home or pay for college, but there is also incentive to leave the money in the account. As teens, they've added money and/or I've added money based on their earnings. That said, neither of them are interested in learning how to invest, but I do go over their accounts with them and they are good at saving.

Big difference - YOU are saving for them. I was assuming the teenager was trying to save on their own.

[MonkeyMama]

I don't see why a teenager would have any trouble saving for their own investments/IRAs.

I personally didn't because I put myself through college. -0- help from any family.

But... Minimum wage will be to the point that my kids would only have to work 8 hours per week to max out an IRA. It's not my intent to help them with that. They can certainly max out their own retirement savings. But they have 3 sets of adults willing and able to help them with college (us and grandparents). Plus, I would advise them to max out ROTHs, which can be tapped for other reasons if need be. That just buys them some flexibility. I don't know that I'd feel comfortable telling my kids to put everything in a 401k or a Traditional IRA, locking away for 50+ years, given the cost of housing where we live.