Teen Investing Ideas

Starting a teen investing plan with your kid can be a great way to get them on the right path financially and can help you to start teaching your children to invest.

You undoubtedly know the advantages of saving and investing money at an early age (otherwise you would not be reading this page), now you just need to know how to invest your money at an young age. Well there are a couple things that you can do.

1. Buy CDs and T-Bills

Bank CDs and government T-Bills are the safest way to start investing. The returns are guaranteed and while you will probably not make a killing doing this it is a first step in the right direction and help kids learn to put money into the bank.

2. Entering the Stock Market

At some point you got to admit that the “barely matching inflation” rates that CDs offer are not really worth it. Why not take a leap towards the highest returning asset class, stocks?

On average the S&P returns 10% a year. If a 15 year old invested $1,000 to open up an account and invested $100/month into it for 40 years earning 10% a year then by the time he/she hits age 55 they would have $686,108.62 to mess around with. A very nice retirement saving with a few years to spare!

Now teens cannot open up an account themselves. But they can open up something called a custodian account. This is where both you and your teen can start investing for your kids. Also any investment decision has to be approved by you first.

This is a great way to start the teen investing experience because as a parent you can hold their hand and walk them through their first investment decisions.

Once the kid comes of age (somewhere between 18-21 depending on the state) you can then forfeit the account to your kid and hopefully they have learned enough to stay the course and keep investing into it. You can read more about custodian plans in this Can Teenagers Invest in the Stock Market article.

3. 529 Savings Plan

529 Education Plans are built for college expenses. You can start investing for your kid’s college fund as early as you would like. The money invested into the plan cannot be written off on your taxes, but the interest that you make is not taxed as long as it is invested for school expenses.

Any money that is taken out and not used for college expenses is subject to being taxed and being hit with a 10% penalty, so make sure that your kids are going to college before starting the plan.

4. Buying Rental Properties

People overlook the idea of a teen investing into real estate. Most people don’t even think it is possible, but there is a way. It involves you getting a property as a partner with your child.

Since you are more likely to have the income and credit score to get the bank loan having you on the property is essential, but you may cosign the loan with your teen and get into the property with your teen as a partner.

Once you have a house you can rent it out and use the rent money to pay down the mortgage. It is an ingenious way to take advantage of the power of real estate. A teen investing into a $100,000 home at age 15 will see the house appreciate over his lifetime. At an average appreciation rate of 4.3% the house would be worth $538,731 by the time they reach age 55.

By that time the mortgage would be paid off and any rent that is paid by a tenet is pure income for you and your kid to split helping you both out during retirement. It is a great way of investing for your kids which can benefit you as well.

Or another way to go about it is to simply control everything until your kid can raise up enough money and income to buy you out and take over the property themselves.

Any way you look at it beginning real estate investing at a young age can be a major help for your teen’s future.

Having a teen investing plan can pan out pretty nicely in the future, but remember that your kid will never get their teen years back. Make sure that they are living a full life and not just working all of their free time and investing their money, they have the rest of their life to work, having fun is important too.

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