Investing for children under 18
There are a few different investment strategies to consider when it comes to investing for children under 18 years old. One option is to open up a custodial account, which will give the child control over the money once they reach adulthood. Another option is to purchase stocks or mutual funds in the child’s name, which will give them an ownership stake in the company and potential dividends down the road. Whatever route you decide to go, it’s important to start investing for your children as early as possible so they can benefit from compound interest!
What is investing and why is it important for you to invest in your under-18 children?
Investing is the process of putting money into an asset to earn a financial return on that investment. It is important to invest for children because it can help them reach their financial goals sooner than if they had not invested at all. By starting to invest early, children can take advantage of compound interest and potentially grow their wealth exponentially over time.
There are many different types of investments that can be made on behalf of children. Some common examples include:
This is one of the simplest and most popular ways to invest for children. Savings accounts typically offer relatively low-interest rates, but they are also low risk and provide easy access to funds if needed.
Global Industry Classification Standard (GICS)
GICs are a type of investment that offers guaranteed returns. They are typically low risk, but they also tend to have lower potential returns than other types of investments.
Bonds are another common type of investment for children. They tend to be less risky than stocks, but they also typically have lower returns.
Stocks are an ownership stake in a company and can offer high potential returns, but they are also more volatile and risky than other types of investments.
The best investment strategy for your child will depend on their circumstances and goals. However, there are a few general tips that can help you choose the right investment strategy for your child:
The earlier you start investing, the more time your child’s investments will have to grow.
Consider their goals
What are your child’s financial goals? Investing in college tuition is going to require a different strategy than investing in retirement.
Consider their risk tolerance
How much risk is your child comfortable taking on? This will help you determine whether stocks or bonds are a better option.
How can parents start teaching their children about investing?
There are a few different ways that parents can start teaching their children about investing:
- Use age-appropriate resources: There are many books, websites, and apps that can help teach children about investing.
- Lead by example: If you are an investor yourself, show your child how you make investment decisions and why you choose the investments that you do.
- Talk about money in general: Money is a topic that can be difficult to talk about, but it is important to have open conversations with your children about finances. This will help them understand the importance of saving and investing in their future.
Investing for children can be a great way to secure their financial future. However, it is important to choose the right investment strategy for your child and to start teaching them about money early on. By following the tips in this article, you can help your child become a savvy investor!