While investing may be a frequent topic among adults, it’s also become popular among teenagers—in fact, 90% of teens in a recent survey reported that they saw investing as a way to save for their future. Starting an investment account early in life allows your funds to accumulate over time, helping you save large sums of money in the long run.

In this guide, we’ll reveal the main benefits of investing for teens, introduce you to investment options and accounts, and show you the necessary steps you should take to start investing.

Benefits of Investing for Teenagers

The main benefit of investing for teens is that time is on your side. This means you have plenty of space to let your money pile up and earn more than you’ve invested by getting a return on your investments. In fact, the average yearly stock market return is 10%, so investing $200 a year will earn you a compound interest of $220—and bigger investments will bring more significant returns.

Investing as a teenager is also great for improving your financial literacy by learning about terms like stocks, interest rates, and money management. Being in charge of your own finances means you’ll:

• Become more comfortable with complex financial topics 
• Develop financial independence early
• Ensure a better financial future for yourself
• Achieve financial goals like saving for college or buying a car

How To Know if You’re Ready for Teen Investing

Before you start exploring investment opportunities for teens, you should ask yourself if you’re ready to start investing. A few questions to consider before taking the leap include:

• Do you earn an income from a part-time job, an allowance, or another source that you can set aside?
• Can you afford to lose some money if your investments don’t go as planned?
• Do you have a parent or another adult who can help you invest if you’re under 18?

If the answer to all three questions is yes (or the first two questions if you’re older than 18), you may consider your investment options.

Before you choose what to invest in, you should familiarize yourself with different investment styles:

1. High-risk investments—These are unstable investments, meaning you can either earn a high return on your investments or lose all your money, which makes them more suitable for experienced investors
2. Low-risk investments—These are more beginner-friendly because they offer secure investing with almost no chance of losing money, but they also provide low returns

Once you’ve carefully examined each investment style, you should choose where and how to invest your money as a teenager based on how much risk you’re willing to take.

What To Invest in as a Teenager

After deciding on your investment style, you can consider investment opportunities and their pros and cons. Based on the accessibility of various investments for teens, you can:

1. Invest in stocks as a teenager
2. Buy bonds
3. Explore funds
4. Look into certificates of deposit

Invest in Stocks as a Teenager

Investing in stocks as a teenager means taking a share or equity in a publicly traded company. If the company’s value increases and the price of your stock goes up, you can sell it for a profit. Some companies also pay their shareholders in dividends—distributions of a company’s earnings determined by its board of directors.

Stocks can be risky investments because their market value fluctuates. So, if you’ve invested in a company whose value starts decreasing, your shares may end up being worth less than what you paid for them. However, if the company’s value increases, you can get a high return on your investment, making stocks a great option for long-term wealth growth.

Buy Bonds

Bonds are essentially fixed-rate loans an investor makes to a borrower. When you buy a bond, you loan money to the bond issuer, and they agree to pay back the borrowed amount plus the interest payments. 

Bonds are usually issued by governments or corporations, and they include predetermined payments over an agreed-upon period, meaning they offer a lower return potential. This is why, while they are low-risk investments, bonds may not be the best option for building long-term wealth.

Explore Funds

Buying shares of funds allows you to invest in multiple stocks and assets at once. The two popular types of funds include:

1. Mutual funds
2. Exchange-traded funds (ETFs)

Both types represent baskets of investments like stocks, bonds, and other securities that you can buy. However, EFTs track a specific market index, sector, or other assets, and you can trade them on the stock market.

A huge advantage of investing in funds is that they allow you to own diverse assets, meaning you won’t lose all of your investments if one fund component loses value. Funds can also be a good investment option for teenagers since the fund manager typically makes all investment-related decisions. However, mutual funds sometimes come with fees that may impact your return.

Look Into Certificates of Deposit

Certificates of deposits (CDs) work like savings accounts, but they require you to hold your money in the account for a certain period. While you can’t withdraw funds for the duration of the investment without penalties, you’ll get a higher interest rate than you would with traditional savings accounts, which may make the waiting period worthwhile.

CDs are a safer investment option than stocks and bonds, but they typically offer a lower return rate. Still, if you decide to invest in CDs, you can explore your opportunities at almost any bank, credit union, or brokerage firm.

Investment Accounts for Teenagers

You can’t make investments without an investment account, so besides deciding what you want to invest in, you need to choose an account that best suits your needs. If you’re 18 or older, you can open a personal brokerage account, but if you’re a minor, you may have to settle for an account managed by your parents. The most popular investment accounts for teenagers include:

1. Custodial accounts
2. Youth brokerage accounts
3. Debit card accounts

Custodial Accounts

The Uniform Transfers to Minors Act and the Uniform Gifts to Minors Act (UTMA and UGMA) custodial accounts are managed by your parent until you reach legal age. After that, you become the owner of the account and can use the money for anything you want. Through these accounts, you can invest in stocks, bonds, or mutual funds, and your family members can make contributions to the account to help you grow your wealth.

If you earn an income, you can also explore custodial Roth IRAs—a retirement account your parents open and manage on your behalf until you turn 18 (or 21 in some states). These accounts allow your contributions to grow tax-free, and you can withdraw them without penalties after you’ve funded the account for at least five years.

Youth Brokerage Accounts

Brokerage accounts are investment accounts offered by licensed brokerage firms, and some are specifically designed for teens and young adults. These accounts typically have low fees, and they allow you to invest in stocks, bonds, mutual funds, and ETFs. All you need to do is fund your brokerage account, and the brokerage firm will handle the transaction for you, making it a great option for beginners.

Debit Card Accounts

Some debit cards and allowance apps for teens let you invest in popular U.S. stocks with your parent’s permission. While your parents typically own the account and have to approve your purchases, you can request trades through these apps and safely explore the stock market. However, some of these apps charge subscription fees, so make sure to take these into account when choosing an app so they don’t surpass your earnings.

How To Start Investing as a Teenager—A Step-by-Step Guide

Starting your investment journey as a teenager may seem intimidating, especially if you’re an absolute beginner. However, there are several steps you can take to set yourself on the right course. Here’s how to invest as a teen:

1. Educate yourself about investing
2. Set investment goals
3. Choose an investment
4. Open an investment account and start investing

Educate Yourself About Investing

Before you start investing, you should familiarize yourself with basic investing terminology like the stock market, annual return, investment risk, and volatility. The more you learn, the better you’ll understand how investing works, ensuring you avoid common mistakes and only follow best practices. You can learn about investing by:

• Reading financial literacy books
• Exploring investing apps
• Talking to your parents

Set Investment Goals

Setting attainable goals for your investments can help you decide on the investment strategy and account that best works for you. For example, if your goal is to invest in your higher education, you may want to explore 529 education saving plans. Although it’s highly unlikely you’ll be able to save enough money to cover all college expenses, your goal can be to save for rent or books. This way, you won’t be tempted to spend your earnings on unnecessary expenses.

Choose an Investment

Picking the right investment option depends heavily on your goals. If you want to save money for a vacation or a car, you may decide to invest in CDs or short-term bonds. However, if you want to invest in long-term goals like a college fund or a downpayment for a house, it may be better to opt for stocks, ETFs, or IRAs since these will allow your money to accumulate, and you’ll earn a higher return on your investments.

Open an Investment Account and Start Investing

After choosing an investment account that best matches your requirements, it’s time to open the account. During this process, most investment account providers will ask for your personal details like your legal name, date of birth, and Social Security number (SSN). If you’re opening a custodial account, they’ll also ask for your parent’s information. In both cases, the process is straightforward and lasts about 15 minutes.

Once your investment account is ready, you can start investing. When doing so, make sure you diversify your investments—invest in companies of diverse sizes and industries to reduce risk. You should also ensure you make regular contributions to the account to increase your earnings. You can start by investing the money you got for your birthday, saved from your allowance, or earned from a part-time job.

How To Start Investing as a Minor

If you’re under 18, you may not be able to open your own brokerage account, but you can start investing in the following ways:

• Open a custodial account—Your parent/guardian can open a custodial account and manage it until you reach legal age
• Invest through a joint account—You can open a joint account with your parent/guardian, meaning the two of you would legally share ownership of all assets
• Subscribe to credit building services—You can start building credit with your parent’s assistance and increase your chances of securing loans with favorable terms 

Custodial and joint accounts help you save money and earn interest, while credit building services assist you in investing in your financial future. Getting an early start at credit building can help you potentially save over $200,000 throughout your lifetime and boost your investment opportunities by obtaining loans with beneficial interest rates. This makes it easier to:

• Get rental housing
• Obtain financing for a car or a credit card
• Find a better job

A great way to start building credit as a teenager is to rely on services like those offered by FreeKick. This provider helps minors and young adults establish a strong credit history with their parent’s assistance as early as the age of 13.

FreeKick—Premium Credit Building and ID Protection

Provided by Austin Capital Bank, FreeKick is a subscription service and an FDIC-insured deposit account that helps young adults and minors between the ages of 13 and 25 build credit with their parent’s assistance. The platform also offers identity monitoring and protection services for the whole family of up to two adult parents and six children.

Start Building Credit Early With FreeKick

Building a strong credit score can be difficult for teenagers since the CARD Act of 2009 prohibits issuing a credit card to anyone under 21. To overcome this limitation, FreeKick allows you to establish a good credit history from the age of 13 through its parent-sponsored credit building service. Here’s how to get started:

1. Create an Account—With your parents’ help, go to FreeKick.bank and choose a plan that best fits your family’s needs and budget
2. Set It and Forget It—When the account is activated, FreeKick automatically starts building your credit over the next 12 months
3. Keep Growing—Once the initial 12-month period ends, you can either renew the account and keep building credit or close it and get a refund of your initial deposit

Keep Your Identity Protected With FreeKick

Protecting your investment account from identity criminals can help you ensure your money is protected at all times. Identity protection is especially necessary if you’re a minor since shocking data shows that a child’s identity is stolen every 30 seconds.

To keep your sensitive information secure, FreeKick offers a comprehensive set of identity monitoring and protection features for both adults and minors. Here’s what the service includes:

Services for Adult Children and Parents	Services for Minor Children
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	Credit profile monitoring 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 Pricing

Regardless of your family’s budget, FreeKick offers a plan that will fit your needs. Both available plans are FDIC-insured up to $250,000. Find more details in the table below:

FDIC-Insured Deposit Amount	Plan Fee
$3,000	$0 (Free)
No deposit	$149/year

Start building your credit early and protect yourself from identity theft—sign up for FreeKick today.