Early Investing Lessons Parents Can Relay to Their Teen Kids

Last month CommunityAmerica hosted a free parent webinar after interviewing 300 teens (high school and college students) about what they wish their parents had taught them about money. There were three key learnings I’ve broken up into a series, sharing advice parents can pass on to their teens in the areas of spending and saving, building early credit, and investing in the teen years. We’ve also shared the advice we gave participants to set themselves up for success in these areas. This week I’ll focus on early investing.

Prioritize and Start Small

We intentionally chose investing as the last topic in the series because it should naturally follow budgeting and savings. That said, our research shows a surprising early interest in investing — as early as 13 years old! This upcoming generation is very interested in learning more about it. It was the number two area of interest in our interviews behind savings! Once the fundamentals of daily money management are established, we suggest starting small with a savings account and making small, regular contributions to facilitate learning. Once early investing feels comfortable, the amounts can be increased.

Getting Started and Learning

The good news? It’s never been easier to start investing in the market. Where once a paper trail and transactional process was required, which drove very young investors away, now it’s painless to start online. Once an investment is established, work with your teen to use this as an opportunity to understand the investment process. Log into the account, watch the activity, and gain an understanding of how the market drives outcomes. It’s important to note, however, the current market is volatile. Try not to encourage concern about large shifts. This is natural and will likely level out at some point.

What about Retirement?  

It’s never too early to start. Although 401(k) accounts continue to be the standard channel for building retirement savings, that requires an employer to offer one. Once a teen begins to earn income, parents can help their kids get in the practice of saving for retirement now by setting up a Roth IRA. This approach encourages the kind of long-term planning and thinking that’s necessary for adults to be financially secure later in life. An early focus on this is one way to encourage a priority on retirement. It’s truly securing a mini nest for their adult nest egg during the school years.

Thank you for joining us for the teen series where we’ve covered early savings, building credit and investing. You can watch the full webinar here.