Do you remember your kids filling up their piggy banks or mason jars with the change they received from you or your relatives on festive days? How eagerly they saved to shop for their favorite toy or book they wanted? you probably did encourage your children to save lots of after they were toddlers and young adults. So, why don’t you teach your teenager to take a position too?
Wonder why you want to after you are working to confirm their future is safe and secure. As parents, we are sure you will want to try and do everything for your child’s future. However, the long run is uncertain, and helping your teen understand more about money now can help them avoid financial troubles later.
Why Must You Help Your Teenager Start Investing Now?
Experts often state start investing early. it's never too early if your children understand more about money. Moreover, if your teens start investing now rather than waiting to take a position later in life, they'll have a plus over their peers both; within the returns they earn and also the knowledge they gain from investing.
Benefits of Compounding: Age is one amongst the foremost valuable factors in investing. you'll enjoy the advantages of compounding, where your money grows multi-fold. the sooner your teens start, the longer their money will work for them.
For instance, imagine your Teen A starts investing Rs. 1000 at age 15 monthly with a tenth return till age 60. Then, Teen A will build a corpus of ~95 lakhs for an investment of Rs. 528000.
But if he starts investing Rs. 1000 at age 30, he will build a corpus of ~22 lakh for an investment of Rs. 348000.
Remember, the cash earned can help your teen pay money for college, start a business, or travel globally.
If you help your children study finances from a young age, you'll help them be less anxious and more confident about money.
We have just told you why you want to encourage your teens to start out investing. As your children enter their teens, they will want to manage their own finances. As a parent, the simplest thing you'll do is help your teen understand investing, the choices available, the pros and cons, the dos and don’ts, and the way to begin investing.
We have four steps your teen can want begin their investment journey
Set up goals and explain the rationale for investing
Before telling your teenager about the investment options encourage them to line up financial goals. The goals may be anything, from buying a phone or a sporty bike to buying a house or occurring a vacation abroad.
Help your teen children understand the time they need to invest to attain their goals. they'll want to speculate for a minimum of a year or more for smaller goals. But they may stay invested longer if they wanted to shop for a house. Once the goals are set and therefore the children know why they need to invest, they will choose the proper investment option and therefore the amount to take a position.
The value of the goal value may rely upon the sum your teen can invest as a payment or regularly. Some parents might want their teens to experience investing without specific goals. However, the simplest thing you'll do is help set a goal to form wealth, as your teen may follow the identical method to form wealth as an adult.
Study the investment, return, and risk options
Just outlining goals, timelines, and values isn't enough. Help your teen now pick suitable investing opportunities. you need to explain how each investment option like FDs, RDs, PPF, mutual funds, equity stocks, and land work. the sort of returns possible, and also the risks involved.
List the benefits and drawbacks of every, letting your teen pick his investment option. for example, if the goal value isn't too high and therefore the timeframe is brief, then your child could select a recurring deposit.
However, if the goal may be a college education, then investing in equity mutual funds can be right. What if your child wants to explore equity investments? Then, explain how diligently your teen would want to research a corporation before investing and therefore the added follow-up required to stay an eye fixed on the investment.
Do the paperwork and begin investments
After your teens choose the investment option, help them founded their savings and Demat accounts. founded a cash account if your teen is a smaller amount than 18 years old. However, if your children are almost 18, they will stock up the forms under your supervision.
Your children can deposit their monthly allowance within the checking account, monitor how their money is growing, and check if they're on the thanks to achieving their goals. Help your children founded e-mandates if the cash is being invested from their account. Don’t forget to clarify the importance of getting money in their account on the maturity.
Caution your teen about risky assets. Start small
For hands-on teenagers who desire investing quickly, the lure of easy money in stocks or cryptos is tempting. Avoiding speculation at this stage is that the smartest thing to try and do. However, despite explaining the concept and its risks, if your child insists, let him start with a tiny low amount. It must be an amount that you simply are able to write off.
Let your children invest for a protracted time to know how losing money or earning a bit feels.
It’s the summer vacation, so we thought of making an entire series only for you. This blog is that the first within the series. take care to stay an eye fixed on the subsequent blog during the week.