6/1/23

A Guide to Teaching Your Children How to Invest and Save at Any Age—Part 3

Raising the Next Generation of Entrepreneurs and Investors (Ages 13 to 17)

Father and son smiling

Investing money for your teenagers can give them a head start on their future financial goals. Yet if you desire to pass down prosperity to the next generation, teaching your teen how to invest could be an even better use of your time.

A survey by Junior Achievement USA found that 35% of teens do turn to their parents for information on the stock market. Yet more teenagers—43%—rely on social media for details about how investing in the stock market works.[i]

As a parent, it's important to make sure that your teenager learns about key financial concepts from reliable sources. Here are four tips that can help you raise up the next generation of wise investors and capable entrepreneurs.

 

Open a custodial account

One way to teach teenagers under the age of 18 about investing and saving is to open a custodial account in their name. This type of account allows you (aka the custodian) to invest money and save on behalf of your child. Other family members and loved ones can also make financial contributions to the custodial account. Best of all, you can involve your teen in the process for some real-life, teachable moments.

Once your son or daughter becomes an adult, the funds in the account become theirs. In the meantime, however, only the custodian has the ability to initiate transactions on the account. This approach can work well since the U.S. Securities and Exchange Commission (SEC) recommends setting up a supervised system when you’re teaching your teenager how investing and trading works.[ii]

 

Talk to your teen about investments

Letting your teenager have a voice in conversations about attractive companies is another way to get your child excited about investing for the future. When you begin teaching your teen about investing, consider focusing on companies that your son or daughter already knows and loves (e.g., clothing brands, beauty brands, video game manufacturers, sports franchises). If your teen has existing knowledge and their own opinions about a company, they may be more intrigued to fill in the rest of the picture with the company’s financial details.

Next, the Federal Deposit Insurance Corporation (FDIC) and the SEC both provide free resources you can use to teach teens the basics of investing and other key financial concepts. These lessons can show your teen how investing may increase the value of their money over time to help them reach important financial goals like paying for college, vehicles, homes, retirement, and more.

 

Encourage your teen to start earning money

The teenage years are an excellent time to encourage your child to start making money on their own. Income-earning opportunities can range from a part-time job to classic side gigs like mowing lawns or babysitting. Other teens might enjoy creating products or services to sell to others online.

Regardless of how your teenager prefers to make money, the actions of putting in the effort to earn extra cash can teach some valuable lessons. Working at a part-time job or developing a side hustle can help your teen begin to develop an understanding of market dynamics, basic economic principles, and entrepreneurial sensibilities.

Additionally, working as a teen could build self confidence and set your child up for higher earnings in adulthood. According to a study by the Employment Policies Institute, high school seniors at the turn of the millennium who worked 20 hours per week earned 20% more per year compared to those who didn’t work six to nine years after graduation.[iii]

 

Instill the importance of a strong work ethic

However your teen decides to generate extra cash of their own, it's important to teach them to treat the opportunity with respect. With a part-time job, for example, you should express the importance of arriving on time (or better yet, early), dressing appropriately, and respecting their managers. If your teen decides to be their own boss, it’s still important to honor the commitments they make to their clients and complete each task in a thorough and timely manner.

A report by the Committee on the Health and Safety Implications of Child Labor confirms that "initial work experiences [could] have a formative influence on the development of work attitudes and habits." Having a job during one’s teenage years could encourage a strong work ethic and other positive employment-related attitudes and habits later in life.[iv]

 

Next steps

Making investments for your child can be a great way to build wealth for your loved ones. Yet if you can go a step further and teach your teen how to invest and why it’s important to do so, you can provide your son or daughter with even more value than the investments you make on their behalf.

If you're not sure where to begin when it comes to teaching your teenager how to invest or save for the future, you’re not alone. As a Santander Private Client, you don’t have to travel this path alone. You can reach out to a Santander Investment Services Financial Advisor for guidance and to discover how to accomplish your vision of prosperity for your family.

[i] Survey: Impact of ‘Gamestop’ Speculation on Teens’ Perceptions; Only Half Believe Stock Market Is ‘A Good Thing” Junior Achievement USA https://jausa.ja.org/news/press-releases/survey-impact-of-gamestop-speculation-on-teens-perceptions-only-half-believe-stock-market-is-a-good-thing

[ii]"Taking Stock in Teen Trading" U.S. Securities and Exchange Commission https://www.investor.gov/additional-resources/spotlight/directors-take/taking-stock-teen-trading

[iii]"New Study Finds Teens' Early Work Experiences Have Long Lasting Career Benefits" Employment Policies Institute https://epionline.org/release/new-study-finds-teens-early-work-experiences-have-long-lasting-career-benefits/

[iv]"Protecting Youth at Work: Health, Safety, and Development of Working Children and Adolescents in the United States." Commission on the Health and Safety Implications of Child Labor https://nap.nationalacademies.org/read/6019/chapter/6#121

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