The sooner you start investing, the more time your money has to grow. That’s why entering the investment world in your teens is an excellent way to set yourself up for a more carefree adulthood.

The problem is, you may struggle to find opportunities to invest in different assets. If you’re wondering how to invest as a teen, this guide will break down your options so that you can choose the most suitable one. You’ll learn the following:

• What criteria you have to meet to start investing
• What assets are available to teens
• How else you can improve your financial well-being

Can You Invest as a Teenager?

The short answer is—yes, you can start investing in numerous assets in your teens. Still, you may not be able to do it independently unless you’re a legal adult. Minors can’t open brokerage accounts, so you must be at least 18 (or older in some states) to get started.

If you’re under 18, you can start setting some money aside and invest it once you meet the age requirements. Alternatively, you can ask a parent or legal guardian to set up a custodial account in your name.

Custodial accounts are managed by legal adults on behalf of a minor beneficiary. All assets in the account belong to the beneficiary, who can access them when they become an adult. 

There are various custodial account types, though three are particularly popular:

1. Uniform Gifts to Minors Act (UGMA) accounts
2. Uniform Transfers to Minors Act (UTMA) accounts
3. Custodial Roth IRA accounts

The following table explains how each account type works:

Account Type	Description
UGMA	A type of investment account focused on financial assets (mutual funds, stocks, bonds, etc.)
UTMA	A more versatile account type supporting financial assets alongside physical and intangible assets (art, real estate, intellectual property, etc.)
Custodial Roth IRA	A retirement savings account managed by the parent or legal guardian

Talk to your parents to explore different options and select the account type that suits your investment goals. If you’re already a legal adult, you can skip this step and go straight to choosing your preferred assets. 

What Can a Teenager Invest In?

Source: Aidan Hancock

There are numerous ways to build long-term wealth if you’re a legal adult, most notably:

• High-yield savings accounts (HYSA)—It’s a specific form of savings account offering a high interest rate. This is a good option for those who aren’t willing to take on significant risks or may not have extensive investment knowledge
• Stocks—A stock is a piece of a publicly traded company’s equity that gives you a small share of its ownership. You earn money by either getting paid dividends or selling your stocks when the company’s market value goes up
• Certificate of deposit (CD)—A CD is similar to an HYSA, except you need to hold money in your account for a predetermined amount of time to earn interest. This is another low-risk option letting you put your allowance or income to good use
• Bonds—Buying a bond means lending money to a financial institution. The bond serves as a security instrument and typically earns you a fixed interest
• Funds—A fund is a form of pooled investment managed by professional brokers. Funds invest in numerous assets and let you join in by purchasing a share of the fund. While not as low-risk as HYSAs or CDs, funds are safer than investing in assets independently as you get professional guidance and support

Your investment strategy will mainly depend on your goals and risk appetite. This is an important decision you shouldn’t take lightly, so don’t rush into any investment haphazardly.

Actionable Tips for Investing as a Teenager

If you’re ready to start investing—either independently or with a parent’s help—there are three important boxes you must check:

1. Educate yourself
2. Define your goals and investment style
3. Understand the risks

Gather the Necessary Knowledge

Source: Joshua Mayo

Investing is a serious endeavor, and it can take years to develop the necessary skills. This is one of the main reasons why starting in your teens gives you a significant advantage. 

It’s best to avoid high-risk assets until you’re confident in your knowledge and understanding of the market. Besides traditional sources of information like courses and books, you can find many apps aimed at aspiring teen investors.

You can even enroll in investment programs that don’t require real money to test your skills and increase your chances of making wise moves and decisions. Explore the available resources, and keep educating yourself to avoid making poor investment decisions.

Set Your Goals and Choose Your Investment Style

Retiring early and comfortably is the main motivator behind many people’s investment efforts. This still doesn’t mean it will be your goal—there are numerous reasons to start building wealth early on.

Your main goal will impact your investment style, which can be split into two broad groups:

1. Income investing—Involves building a portfolio that generates an ongoing stream of passive income
2. Value investing—The practice of investing in undervalued assets so that they can be traded when their value increases

Both approaches have benefits and drawbacks you should weigh before choosing the one suitable for you. Income investing typically carries less risk, but value investing might give you faster returns. Define your priorities and goals, and then choose your strategy accordingly.

Beware of Investment Risks

Source: Anne Nygård

There’s a common saying that you should never invest more than you’re willing to lose. This is an excellent rule to follow, as no amount of knowledge guarantees that your investments will pay off.

There are numerous risk types you should keep in mind, as explained in the table below:

Risk Type	Explanation
Systemic risk	Unavoidable risks affecting virtually all assets (e.g., the 2008 financial crisis)
Liquidity risk	A chance that the demand for a particular asset will drop so much that you can’t sell it
Inflation risk	The probability of inflation negatively affecting an asset’s value
Interest rate risk	The risk of corporate or government bond investments losing value due to consistent interest rate increases

No asset or investment strategy is risk-free, so beware of any opportunities that guarantee returns. 

A Safe Way To Improve Your Financial Stability

Investing isn’t the only way to ensure a more comfortable and secure adulthood. Even if you accumulate a certain amount of wealth, chances are that you’ll need a loan or another credit product at some point. This is where a strong credit profile can be invaluable.

While it’s not considered an investment in a traditional sense, your credit profile can pay off quite handsomely—it can save you over $200,000 throughout adulthood!

Much like investing, credit building may not be available to many teens. Because of the CARD Act of 2009, anyone under 21 must meet one of the following two conditions to obtain a credit card:

1. Showing a proven ability to repay the debt independently
2. Having a co-signer over 21 who can assume responsibility for the debt

As many teens can’t meet these criteria, parents often decide to help by adding them as authorized users of their cards. This creates a credit profile for the child sooner than they’d get one independently.

The problem is, it also binds the child’s credit profile to the parent’s—the authorized user inherits their parent’s credit history, and any reckless behavior damages both profiles. 

Worse yet, the child only builds credit while they’re registered as an authorized user. As soon as the parent removes them, all credit history associated with the card is deleted from the child’s profile.

To let parents invest in their children’s future without risks and drawbacks, Austin Capital Bank created FreeKick.

Go Beyond Financial Education With FreeKick

While it’s important to provide your child with a financial education, you also need to take solid steps to give them a bright financial future, such as building their credit profile and protecting their identity. FreeKick by Austin Capital Bank is an FDIC-insured deposit account that offers both of these services.

FreeKick’s Credit Building Service

All children aged 13 to 25 can benefit from FreeKick’s credit building service. To reap its advantages for your child, take the following steps:

1. Create an Account—Sign up on FreeKick.bank and choose a deposit that suits your budget
2. Set It and Forget It—FreeKick will start building 12 months’ worth of credit history for your children
3. Keep Growing—After 12 months, either close the account without any fees or continue building credit for your child for another year

With these simple steps, your child can have up to five years of credit history once they turn 18. This will help them save $200,000 during their lifetimes as they’ll be able to secure loans on favorable terms.

FreeKick’s Identity Protection Service

Credit building is incomplete without identity protection. Child identity theft occurs every 30 seconds, and if your children fall victim to it, their credit profiles can suffer significant damage. This is why it’s a good idea to invest in FreeKick’s identity protection service, which offers the following features for minors:

• Credit profile monitoring
• Social Security number (SSN) monitoring
• Dark web monitoring for children’s personal information
• Up to $1 million identity theft insurance
• Full-service white-glove concierge credit restoration
• Sex offender monitoring—based on sponsor parent’s address

FreeKick also offers identity protection for adult children and parents via the following features:

• Credit profile monitoring
• SSN monitoring
• Dark web monitoring for personal information
• Up to $1 million identity theft insurance
• Full-service white-glove concierge credit restoration
• Lost wallet protection
• Court records monitoring
• Change of address monitoring
• Non-credit (Payday) loan monitoring
• Free FICO® Score monthly
• FICO® Score factors
• Experian credit report monthly

FreeKick Pricing

FreeKick has two pricing plans:

FDIC-Insured Deposit	Annual Fee
$3,000	$0 (Free)
No deposit	$149

With both plans, you get:

1. Credit building for six children aged 13 to 25
2. Identity protection for two parents and six children aged 0 to 25

Secure your child’s financial future through good credit and a protected identity—sign up for FreeKick today.

Featured image source: Chris Liverani