Teaching your teen to invest

If you have a teenager you are likely hoping to teach him or her as much as you possibly can about saving money, creating budgets and really being financially smart. Teaching your teen how to invest their money wisely is one of the best decisions you can make in order to show them the purpose of saving money and how a single $1 can turn into a larger amount in a few months. However there are not a lot of large investment options for teens so what can you do in order to teach them about investing?

Does your teen have a job or some way of getting income? Besides their income from you that comes from chores, your teen should have a job in order to learn how to work but also to learn the value of a dollar. When teens work for the money they get to spend, they appreciate it more and as parents it poses a great opportunity to teach our children about work and how to save money.

Take your teen to your bank and open up a checking account for them along with a savings account. Teach them to invest money into the savings account and to always plan on saving 10% of their paycheck so that they do have money to fall back on when things are not easy. Plus they can have this money set aside to help pay for their college education.

Once you have an account open for them you can then begin teaching them about investing their money. If you have online access to your investment accounts, pull them up. You need to be open with your teen about money and let them see that you really do work hard to put money into a retirement account. It is a good idea to look into investment options that your teen can participate in like a CD.

Pull up some graphs and financial information about investing and really show them how each time they save it will start to add up and it can easily accumulate to a larger amount by the time they hit a certain age. In some schools teachers will use a graph to show students how their investments will add up to 1 million dollars by the time they are 40. It's actually pretty amazing to see how quickly you can become a millionaire if you will just focus on saving money. Since many teens will respond to documents like this, show it to them so they can see just what you are talking about.

In many cases teens will not be interested in learning about investing so you need to make it interesting. One way to do this is to use a car or give them an incentive to get a car by investing. If you can relate it to something that they want, it will really peak their interest and should provide you with a great teaching opportunity. What you can do is show them how car payments work and if they want a car they have to pay a certain amount toward the actual loan and another towards interest and then show them the pay off date for the loan. The more they are able to learn about investing the easier it will be for them to have financial success and to hopefully stay out of debt.

Kids really do learn a lot from their parents so if you expect them to be good with money, you need to practice what you preach. Talk to them about interest rates, credit cards, and student loans. The more you are open with your teen the easier it will be for them to understand investing as they get older.