There are numerous compelling reasons why teenagers should consider investing, with the most significant advantage being time. The earlier one starts, the more time their investments have to grow, benefiting from compound interest and the time value of money. Even small investments made in their teenage years can snowball into substantial wealth over time.
Beyond just financial growth, teenagers bring unique perspectives shaped by their generation, interests, and values. They have firsthand insight into emerging trends, popular brands, and innovative technologies. This fresh outlook allows them to identify investment opportunities that older investors may overlook.
For example, Millennials and Gen Z have played a major role in the rise of environmental, social, and governance (ESG) investing. By choosing to invest in companies that align with their values—such as sustainability, ethical labor practices, or diversity initiatives—they effectively “vote” with their dollars, influencing corporate policies and shaping the market.
While getting started may seem daunting, investing doesn’t have to be complicated. Today, there are numerous tools and strategies designed to help young investors begin their journey with confidence.
Some assume that investing is only for adults, but that’s a misconception. While it’s true that most brokerage accounts require individuals to be at least 18 years old, teenagers still have several ways to invest. With the help of a parent or guardian, they can open a custodial account or explore investment platforms tailored for young investors.
In this guide, we’ll break down the most important things teens need to know about investing, equipping them with the knowledge to make smart financial decisions for the future.
The Importance of Investing Early
Investing early is one of the most powerful financial strategies for building long-term wealth. The sooner you start, the more time your money has to grow, thanks to compound interest—the process where your returns generate additional returns over time. Even small, consistent investments made at a young age can snowball into substantial wealth over the years.
Example:
Let's say two people, Alex and Brian, start investing at different ages.
- Alex starts investing $200 per month at age 25 and continues until he is 65 (40 years). Assuming an average 8% annual return, Alex's investment grows to $622,000.
- Brian, on the other hand, starts investing the same $200 per month but waits until age 35 to begin. He invests for 30 years instead of 40, earning the same 8% return. His total investment grows to $283,000.
Even though Alex and Brian invested the same amount each month, Alex ended up with more than double Brian's wealth simply because he started 10 years earlier.
Beyond financial growth, early investing instills strong financial habits. It teaches individuals how to manage risk, diversify portfolios, and make informed financial decisions. Those who start investing early gain valuable experience navigating market fluctuations, which helps them become more confident and disciplined investors in the future.
Moreover, investing early allows for greater flexibility in achieving financial goals. Whether it's saving for retirement, buying a home, or funding a passion project, an early start ensures that you have more time to accumulate wealth without relying solely on earned income.
Ultimately, the earlier you invest, the less you need to contribute later to reach the same financial milestones. Time is your greatest asset in investing—so the best time to start is now.
Custodial Accounts: A Smart Way to Invest for Minors
A custodial account allows an adult to manage investments on behalf of a minor until they reach adulthood—typically 18 or 21 years old, depending on the state. These accounts, established under the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA), provide a structured way for parents or guardians to transfer assets to children while maintaining legal control over investment decisions.
Types of Custodial Accounts
- Custodial Brokerage Accounts (UGMA/UTMA):
- The custodian (adult) oversees the investments until the minor comes of age.
- Funds can be used for any purpose benefiting the minor, such as education or future financial needs.
- Custodial Roth IRA:
- Minors can start saving for retirement early through a custodial Roth IRA if they have earned income from a job or paid activity.
- Contributions grow tax-free, making it a great long-term investment option.
- Joint Brokerage Accounts:
- Allows minors to co-own an investment account with an adult.
- The minor can actively participate in investment decisions, but the adult typically retains final approval on transactions.
Custodial accounts offer young investors a head start in wealth-building, allowing them to benefit from compound growth while learning valuable financial skills under the guidance of a trusted adult.
Are You Ready to Start Investing?
Investing at a young age offers significant benefits, but it’s natural to wonder whether you’re truly prepared to take the plunge. Before making your first investment, consider these key questions:
- Do you have extra money to invest?
If you have earnings from a job or another source that you don’t need for immediate expenses, you may be in a good position to start investing. - Are you comfortable with risk?
Investing always carries the possibility of loss. Can you afford to lose the money you invest without it impacting your essential needs? - Do you have adult support?
If you’re under 18, you may need a parent or guardian to help open and manage your investment account. - Do you understand your investment choices?
It’s important to research and understand how different investments work before committing your money.
If you answered "yes" to most of these questions, you may be ready to start your investment journey. The earlier you begin, the more time your money has to grow through compound interest and smart financial decisions!
What Teens Can Invest In
Once you have a clear understanding of your risk tolerance, you can begin exploring different types of investments that align with your financial goals. The right investment depends on what you want to achieve and how much time you have to grow your wealth. Here are some of the most common asset classes that teens can consider:
Stocks
When you buy a stock, you own a small portion of a publicly traded company. Stocks can generate returns in two ways:
✅ Dividends – Some companies distribute a portion of their profits to shareholders.
✅ Capital Gains – If the stock price increases, you can sell it for a profit.
While stocks offer high growth potential, they also come with risk. Market fluctuations can cause stock prices to drop, and if a company performs poorly, your investment may lose value. However, for young investors with a long time horizon, stocks can be a great way to build wealth over time.
Funds (Mutual Funds & ETFs)
Rather than buying individual stocks, teens can invest in funds, which pool money from multiple investors to invest in a variety of assets.
➡ Mutual Funds – Professionally managed funds that invest in a mix of stocks, bonds, or other securities. Some have high fees, but they offer diversification.
➡ Exchange-Traded Funds (ETFs) – These track a stock index, sector, or asset class and are traded on the stock market like individual stocks.
Funds provide built-in diversification, meaning if one investment within the fund loses value, others may offset the loss. ETFs, in particular, offer a low-cost way to gain exposure to different markets, making them ideal for young investors.
Bonds
Bonds are a more stable investment compared to stocks. When you buy a bond, you are lending money to a company or government in exchange for periodic interest payments and the return of the principal at maturity.
✅ Government Bonds – Issued by the U.S. Treasury or municipal governments, these are considered lower-risk investments.
✅ Corporate Bonds – Issued by businesses, offering higher returns than government bonds but with increased risk.
While bonds are a good source of fixed income, they typically provide lower returns than stocks. For young investors focused on long-term growth, bonds can be part of a diversified portfolio but should not be the primary investment.
Real Estate Bonds – A Smart Fixed-Income Option
For teens looking for a secure and hassle-free investment option, Compound Real Estate Bonds (CREB) offer an excellent alternative.
✅ Fixed 8.5% APY – Unlike stocks, which fluctuate, CREB offers stable returns.
✅ No Fees & Anytime Withdrawals – Making it easy to access funds when needed.
✅ Asset-Backed Security – Your investment is backed by real estate and U.S. Treasuries, minimizing risk.
CREB provides young investors with a simple way to earn consistent passive income while avoiding stock market volatility. For those seeking financial independence, investing in a secure, high-yield option like CREB can be a smart move.
Other Investments
Beyond stocks, funds, and bonds, teens can explore other investment options:
✔ Certificates of Deposit (CDs) – A low-risk option offering fixed interest for locking in savings for a set period.
✔ Cryptocurrency – A highly volatile but potentially lucrative investment, best suited for those willing to take on risk.
✔ Futures & Options – Complex financial instruments requiring advanced knowledge and higher risk tolerance.
While some of these assets provide exciting opportunities, they also come with significant risks. It’s essential for young investors to research thoroughly and start with safer options before diving into high-risk investments.
Conclusion: The Best Time to Start Investing is Now
Investing as a teenager is one of the smartest financial decisions you can make. By starting early, you unlock the power of compound growth, allowing your money to multiply over time with minimal effort. Beyond financial returns, early investing helps build essential money management skills, fosters discipline, and instills a long-term mindset—key elements of financial success.
While stocks, ETFs, and bonds are traditional investment options, young investors should also consider fixed-income opportunities like Compound Real Estate Bonds (CREB). With an 8.5% APY, no fees, and anytime withdrawals, CREB offers a secure, low-risk alternative to volatile stock markets. Plus, being backed by real estate and U.S. Treasuries ensures financial stability, making it an excellent choice for those looking to grow wealth without market uncertainty.
No matter where you choose to invest, the most important step is getting started. Whether it’s a custodial account, a Roth IRA, or an alternative investment like CREB, the key is to begin as soon as possible. The earlier you start, the more financial freedom you can achieve in the future. Your journey to financial independence starts today—why wait?
