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How to Start Investing as a Teenager

Last updated August 17, 2023

How to Start Investing as a Teenager

As you start earning your own money and advancing in your education, the thought of investing may seem like something far away. However, it's important to remember that investing can be a valuable tool for building wealth and securing your financial future, regardless of your income level or age. Here are some things you need to know about investing your money, even as a teen. It's never too early to start learning about investing and it's important to approach it with a solid understanding of the basics!

Note: It's important to remember that investing involves risks and that all investments carry some level of risk. Before making any investment decisions, it's important to do your research and seek advice from trusted adults, such as parents or financial advisors.

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Start with the basics

Investing is commonly defined as putting money into assets - like real estate or stocks and bonds - in the hopes of making a profit. Basically, you are buying something that you hope will turn into more money, or profit, down the road. Before you start investing your money, however, it's important to understand the basics of finance first. Learn about budgeting, the importance of opening a bank account, saving, and debt management. Be sure to check out all of our free Money Management resources so you’re set up for success!

Defining key terms

The world of investing and finance comes with a new library of terms to understand! Before you start to invest be sure to know these key terms:

  • Stocks: Stocks represent partial ownership in a publicly traded company, like Starbucks, Apple, or General Motors. When you buy a stock, you are basically buying a small piece of the company. As the company grows and earns profits, the value of the stock may increase, allowing you to sell your shares for a profit. So if you buy a stock at $20 and the value increases to $40, you could sell it and get a $20 profit!
  • Bonds: Companies and governments issue bonds, or debt securities, to raise money. Essentially, when you buy a bond, you are lending money to the company or government that they have to pay back in a specific amount of time (which is usually over years). So when you buy a bond, you will receive regular interest payments and be paid back your initial payment once the bond’s term ends.
  • ETFs (Exchange-traded funds): ETFs are basically like buying a basket of stocks and bonds. Also known as “investment funds”, ETFs are traded like other investments but by buying into a bundle your investments won’t live or die on only one investment. For example, they may bundle investments in many different types of companies and industries, like technology, manufacturing, and shipping, rather than you buying one stock in one company and hoping that always performs well.
  • Stock market: The stock market is a platform where stocks, bonds, ETFs, and other investments are bought and sold. It is a place where companies can raise money by selling shares of their stock to investors and where investors can buy and sell those shares to make a profit.

Key tips

Investing is all about making your money work for you. However, it is not always the easiest world to navigate. As you get started keep these tips in mind as you start your journey:

  • Set realistic goals: Before doing anything, think about what you want to achieve. Maybe you want to save for college, buy a car, or just learn more about the stock market. Doing this will allow you to get specific with how you want to invest and how to ask for support from trusted adults!
  • Diversify your investments: One thing you will hear often is that a key to successful investing is diversification. This means spreading your investments across different things like stocks, bonds, or even savings accounts. Having your money spread means you’re not dependent on just one thing.
  • Be patient: Investing is a long-term game, and it takes time to see the benefits. You may not see significant returns right away, but that doesn't mean you should give up. For options like high-interest savings accounts, it is best to wait years so you can see the interest add up! For smaller investments like some of the trading options below you could wait for at least a few months to see how it plays out.
  • Start small: You don't need to have a lot of money to start investing. In fact, starting small can be a good way to learn the basics of investing without risking too much. Consider using an automated app, like Acorns, and learn from how they use small amounts of money to invest.
  • Consider the costs, beware of scams: Investing often comes with fees and commissions. It's important to understand these costs and factor them into your investment decisions. You can avoid scams by looking for key terms like “fiduciary responsibility” which means a company or advisor must have your interest in mind, not their own!

Ways to get started

There are so many apps and companies out there that can support young people to explore investing. Many offer ways to invest and free resources to learn more. Here are a few to get you started:

  • Stash: Stash is an app that allows you to invest in stocks and ETFs with as little as $5. It offers personalized investment recommendations and educational resources to help you make informed decisions. It is built for people just starting out in investing!
  • Acorns: Acorns is an app that invests your spare change into a diversified portfolio of ETFs. It is a great option for beginners who want to start small and automate their investments.
  • Robinhood: Robinhood is a popular app that allows you to invest in the stock market by buying stocks and bonds without paying any commission fees. It is user-friendly and has a simple interface that makes it easy to get started.

As you continue to invest in your future, be sure to check out the rest of our FREE money management resources to learn how to be a smart spender and saver! And if you have any job or finance-related questions for us be sure to text #Jobs to 33-55-77 (If you're using a mobile device, click here to have the text message set up for you).

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