The Pros and Cons of Teen Investing

Some people call teenagers mini-adults, and with the world at their feet and many hopes and dreams, it might seem like they have it all together, but they still need their parent’s input. If you are a parent of a teenager, you can do right by them by starting to teach them life lessons such as investing and money management. Then, right from when your child is young, you can show them how to use the money to generate even more money over time.

Many parents are starting to think about their child’s future and are making plans to set them up for life. You can be one of those parents who begins by using tools like an investment app for kids – to help them get started.

Perhaps you might be worried about the risks of investing and whether your teen will gain something tangible from investing early. In this article, we will detail the pros and cons of teen investing; read on to find out more.

Pros of Teen Investing

There are numerous advantages to getting your teenager to start investing in the stock market. Besides being a great way to teach them about money management, it will also teach them essential life skills.

Below are some of the benefits of investing as a teenager:

Developing Financial Responsibility

When your teen learns the ins and out of investing in the stock market – they will realise it isn’t a clear-cut scheme. The stock market can be a volatile place, and the value of your stock can plummet at any time following a company update, market changes, and so much more. Your teenager will need to be aware of this, and they will learn this as they keep on top of news and updates and monitor their investments.

Once your teen understands that their stock value can rise and fall at any time and continues to invest despite those risks, they will continue investing no matter what. Then, when the market value improves, and their money value grows, they will learn that investing money pays off in the long term.

Learning About Investing and the Stock Market

Many adults still don’t understand how the stock market works and what it is. When your teen learns about this from a young age, they will have a leg up in the real world as adults. In addition, as your teen learns more about the various aspects of investing in stocks and shares – they will grow confident and open their mind to the possibilities of what the world can offer them.

The Power of Compounding

Teens who start investing early, rather than waiting until adulthood, will have an advantage over others because of the power of compounding interest. In addition, teenage investors have more time to get into the habit of investing and time to grow the value of the money.

For example, if a 13-year-old starts investing $150 per month with a 20% annual return – and they do this until they turn 50, they will have made over $14 million.

Building Wealth over Time

When you start investing early, you have time to build wealth.

When you build wealth over time, that money could be passed down across generations. In addition, it can be used to purchase homes, estates, and things that would generate even more residual income over the years.

Cons of Teen Investing

Just as there are benefits to teen investing, there are also some cons. Things could go wrong if care is not taken and the proper guidelines are not followed.

Lack of Experience and Knowledge

When you start investing, it’s essential to ensure that you learn everything about it. Make mistakes, learn from them, and read about investing wisely. Without experience and knowledge,  anyone can make the wrong investment and lose their money quickly.

It is good to ensure that you invest in a legitimate scheme that is not a scam. Unfortunately, every day, thousands of people fall prey to scams. If you are in doubt and you hear about an investment opportunity that sounds too good to be true, chances are it is a scam.

Increased Risk and Volatility

The stock market can be very volatile; it rises and falls every day. So if you are investing, you must be prepared to lose some money. That’s why you should only invest an amount you are comfortable with losing. For example, we all know about bitcoin stock which people have invested in in the last few years. It has been one of the high-value stocks one can have, and occasionally, it also drops.

Potential for Losses and Debt

Since the market constantly fluctuates, there is an increased risk of loss and debt. This is why you should only invest an amount of money you can afford. For example, you can make small monthly payments that you would have made as part of your savings.

Distraction from Education and Other Responsibilities

If your teen is at a crucial stage of their education and has numerous exams to prepare for, investing might seem like another chore to add to their plate. However, it could be worth waiting for things to calm down before getting them to start investing.

Is Teen Investing Right for You?

Before investing, you should consider whether it is suitable for your teen. Whether your teen has an apt for learning and is ready to take on the challenge of the stock market or they don’t know a thing about it –  you can consider teaching them the fundamentals of investing. But, of course, as a parent, only you know whether learning about investing is suitable for your teen.

In closing, you can set up your teen for life by teaching them to invest right from a young age. Teens who start investing early and keep it up have a high chance of becoming a millionaire in their lifetime. Lastly, as parents, you should learn whether investing is suitable for your teen before you get them involved.