4 Reasons to Teach Teens the Basics of Investing

by Travis Pizel · 6 comments

My teenage son started his first part-time job a about two months ago. Earning $9.75 an hour, and working 25 hours week, results in some nice income for a teenager. I’m requiring him to save half his earnings to be used for purchasing his own car, or for use when he goes to college in a few years.

I don’t want him to just deposit his money into a savings account, however. I really want to use the income from his first job as a tool to teach him about the world of investing.

Here’s why it’s important to teach your teen about the basics of investing now.

1. Low Interest Rates

Savings account interest rates are currently a fraction of a percent. Not only will my teen see very little return on his money if he just deposits it all into a savings account, but it would actually devalue in real spending power as it sits there.

2. Stock Market History

If he puts this month to work, however, smart and safe investments can yield a much higher return on his money. Over the last few years, the stock market has seen significant gains. There is a very good opportunity to see real growth of his money if he invests it instead of just simply putting it into a savings account.

teens investing3. Education for the Future

When he graduates from college and starts his first job, he will likely be flooded with information about 401K programs and investment funds. Helping my teen become familiar with investing and the stock market now will better prepare him for that time.

4. Low-Cost Investment Platforms

I don’t want my son spending a lot of his cash to pay an annual fee at an investment firm. Fortunately, there are several low cost or free investment platforms available with which he can invest some of his funds.

There is certainly some risk involved in investing in the stock market, so we can also use this as a lesson in having a diverse portfolio. I would want him to invest in several companies, as well as even keep some of his funds in a savings account.

Teaching Teens About Investing

This is a great opportunity to teach my son about how to make money work for him, as well as hopefully help get a return on his hard earned cash. We can research well known companies together, invest some of his cash, and watch his money grow.

If I want to give my son the skills to be a financially savvy adult, I have to include educating him on investing. Because of the current environment of low savings interest rates, and a favorable market, I believe this is the perfect time to teach him those skills, and help him earn some money as well.

Do you let your teenager invest in the stock market? Do you think investing is a valuable skill to teach a teen?

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  • Kellie @ Big Style Finance says:

    Definitely a good idea. I wish I’d been more money savvy when I was a teenager, but the education system, and most parents, tend to err on the conservative low risk side when teaching that stuff.

  • Samuel says:

    If a teen can start investing in mutual funds or penny stock early enough, he may not smell poverty in his life.

  • Ramona says:

    In my country our teenagers (just like many of their parents) lack any form of financial education. So, teaching them anything would be a great idea, investing from an young age would be even better.

    • Travis @enemyofdebt.com says:

      I’ve said it before, and I’ll keep saying it – our job as parents…not to mention our educational system, is to prepare our children for adulthood. How can we say we’re doing a good job of that if we do not education them about finances, and investing, and saving for the future?

  • Brittney @ Life On A Discount says:

    I completely agree! The US in particular needs more financial education, especially at a younger age. I started working young and was taught about saving and budgeting accordingly. It has served me well. I really wish I had learned more about investing in my teens, but was fortunate to learn at 21 and I have been investing since. I still have a great deal of friends who fear or do not understand investing of any kind (even in retirement) and they are in their late 20’s/early 30’s now. I fear they may never take the leap and their financial life will suffer for it.

    • Travis @enemyofdebt.com says:

      Great comment, Brittney….your description of friends is EXACTLY what I want to NOT happen to my son. Thanks for sharing!

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