I’m a teenager. Are there available investments for teens that I can dip my hands into?

The short answer, YES!

Whether you’re a teenager or a parent looking for the best investments for your child, this article will walk you through the core of why you should start investing sooner rather than later and why you should instill financial knowledge into your child. 

Moreover, let’s take a look at the best investments for teens readily available out there where you have the potential to make your money grow and work for you.

Essentially, investing is a way to put your money to work non-stop. It means you pull up your cash into an investment account with the hopes of multiplying the amount you initially invested in. 

Think of it this way. Most people use the term investment or investing in a piece of quality equipment, device, or experience. For example, investing in a high-definition camera for your video editing work or hobby. 

You do this because you want to produce better images or video content to build up your photography portfolio, thereby gaining more clients and up-leveling your skills.

That is the same analogy in investing. But in this case, you use your cash resources to double, triple, or quadruple your money. Furthermore, it’s like earning a profit but with minimal to no work at your end.

Investing is one form of the many branches of personal finance.

Aside from that, you don’t need a vast amount of money to get started. And you can begin as early as now.

Here’s how and examples of the best investments for teens like you (or for your child if you’re a parent reading this)

Related content: Best Books on Investing for Beginners- 13 Must-Read Books

The best investments for teens

1. High-yield savings account

Probably one of the building blocks for investments for teens is a high-yield savings account. 

If you’re a parent, you can open your child an account in your bank that offers this or even a “kiddie junior savings account.” As they say, a piggy bank is good, but a savings account is better.

That way, they will learn the essence of saving money at a young age. Moreover, unlike traditional savings accounts, a high-yield savings account offers higher interest rates. Besides, it is provided mainly by online banks. Therefore, it is a good starting point to get your kid's feet wet in the financial realm.

A savings account may not ultimately make you rich, but the savings amount plus interest rates add up, which can get your child excited and motivated to save more money.

Aside from that, it is not tied to any other financial goals except what you have in mind. So it’s easy to open an account and a low-risk type of investment. 

For teenagers, you can put the money you earn from your side jobs or gifts you receive during the holidays in this high-yield savings account. Keep in mind to give your money a purpose and save more, as early and as much as you can.

2. Checking account

Here is another one of the best investments for teens out there. It is to get them comfortable using a checking account.

The idea of managing your finances, budgeting, and using a debit card will help your child become financially responsible.

Plus, it is one way to headstart their investing journey. A checking account will reinforce basic financial concepts we adults often take for granted, such as adding and withdrawing funds. 

Just teach your kids that a checking account is for their spending, and they should avoid dipping into their savings account. It’s a separate and completely different thing!

Instead of holding the money long-term, a checking account or transactional account must be for everyday use—for example, purchases, bills payment, and more.

An excellent checking account for teens should be fee-free, with no minimum deposit and hefty opening and balance requirements. 

3. 529 College Plan

A 529 College Plan is one example of educational accounts which is a good investment for teens. It allows the funds stored here to be used to pay for educational expenses. 

For instance, tuition fees, enrollment, books, computers, supplies, among others. It is used mainly by parents to start saving for their kid's college early.

Furthermore, a 529 College Plan is offered by states and educational institutions. There are also no taxes on investment gains; hence, it’s tax-advantaged.

Aside from that, the investment options are limited based on the stocks and mutual funds available in the plan.

Another characteristic of the 529 College Plan is that there is no contribution limit. But over $15,000 requires a gift tax return filing. But, then, you can withdraw anytime without penalty as long as it is used for educational expenses.

4. Custodial Traditional IRA

Looking for the best investments for teens? Well, you can now start investing in a Traditional IRA under a custodial account.

Besides, the best time to start saving for retirement is NOW (regardless of whether you’re moons away from it), and an IRA helps you do just that.

Here’s what you need to know about Traditional IRA. Essentially, it is an investment account that anyone can open up to start saving towards retirement.

Whether you plan to retire 10, 20, 30, or 40 years from now, the best time to start planning for it is now.

Likewise, even if you’re a minor, you can have this through the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA).

Think of it like a child’s trust funds. When minors reach legal age (18 or 21), they can have full access and manage it themselves, depending on state laws.

Furthermore, the only difference between these two is that one is a gift while the other is a transfer (more on this later).

5. Custodial Roth IRA

Like Traditional IRA, a Roth IRA is also an individual retirement account that offers unique tax treatment.

If you’re a parent, you can open this account on behalf of your child. Then once they reach legal age, you can let them manage it themselves.

A Roth IRA is one of the best investments for teens because of its flexibility plus tax treatment. Since children have decades for their contributions to grow tax-free.

Moreover, you can withdraw contributions to Roth IRA- tax and penalty-free

6. Funds

Mutual funds

A mutual fund is a basket of assets lumped into one account. Investing in one spreads your risks and offers more diversification in your portfolio. 

It is one of the best investments for teens because it’s easier and more flexible. Plus, you don’t have to dedicate too much time to figure out and study each stock.

ETFs

An ETF is almost similar to mutual funds only because it is a fund containing a bunch of assets such as stocks, bonds, real estate, etc. Moreover, it mimics an index like the S&P 500.

With ETFs, you don’t have to figure out which stock will perform well and find the best 10 or 20 stocks to hold.

Index funds

Index funds and ETFs are both baskets of other assets like stocks. The only difference is a few technical aspects.

ETFs can be traded throughout the day, while you can only buy index funds at the end of the trading day.

There is also no minimum investment required beyond the price of one share for ETFs, while in index funds, some require a high minimum investment as high as $3000+

Lastly, Index funds can only buy the broker’s funds and not incur charges, but ETFs can buy from any broker without transaction fees.

Therefore, it’s your personal choice which of these types of funds you would like to get started depending on your risk appetite.

7. Stocks

Yes, you can still invest in stocks even if you’re a teenager. You can do this by opening a custodial account. This is because most brokers require legal age to start trading, so if you want to participate in the world of stocks, you can have someone open it on your behalf.

Learn while you’re at it and get hold of your funds once you’re old enough.

8. Bonds

A bond is a type of asset that has a fixed income and maturity date. This is also a good investment for teens out there because of its low risk. 

Moreover, there are different types of bonds. These are municipal, corporate, and government bonds, to name a few. 

In simple words, with bonds, you as the investor provide loans to the borrower. 

9. Business

If you're an aspiring teen entrepreneur, investing in a business suit you! Besides, you don't have to have lots of money to get started.

You can start online! Even better, you can start with your passion. What is it that you can do to help provide solutions to others? Or can you answer people's queries about a particular niche or general? How will you connect your passion or your hobby to make it profitable?

Remember, the big corporations and strong businesses today started as small one. So who knows? You might be the next in line for Forbe's list of top 10 business people in the world. Moreover, building a business from scratch is possible; you'll enjoy the experience of growing it and making the world a little bit better.

If you're looking for the best ideas out there, here are the best and most successful businesses to start with little or no money.

10. Course Program

As a teenager, investing in assets is not the only option out there.

You can first equip yourself with the latest knowledge and skills about investing. Then read some books! Or you can attend webinars or financial conferences to network with people of the same mind.

Moreover, resources are available online. But if you want in-depth experience, enroll in a finance class, go back to school, or enroll in a course program that will teach you the basics and advance personal finance.

As they always say, “investing in knowledge pays the best interest.” And that is the best investments for teens today!

11. CDs 

Also known as certificates of deposits, CDs are similar to bonds because they're low-risk assets.

It is also known as a time deposit. CDs are savings you will leave in your bank and wait until their maturity age and earned interest.

So you can also treat it as a passive asset because you didn't exert too much work, but the money grows and works for you. First, however, ensure that the money you will put in is the money you won't be needing in the next three or five months or even years.

This is because, in most cases, there is a penalty for withdrawing before the account hits its maturity period. The earned interest is also fixed and sometimes lower. But overall, it's safe to put your money in here if you're a beginner investor.

Why start investing while young?

Whether you’re a teenager reading this right now or a parent that stumbles upon our space here on the web, here’s why you should start investing as early as now. Or in other words, why you must teach your kids the value of investing.

For future financial goals.

If you’re saving for your dream house, college tuition fees, or aspiring to retire early, investing will fast-track your goals.

Remember, you are growing your money in investing, unlike when you leave your money at the bank, gaining a small interest rate. With investing, you let your money work hard and make more money for you.

To learn more about personal financial literacy.

When you are young, most people will adore your youth. But, it is also the perfect opportunity to widen your knowledge and skills about basic personal finance.

While young, seek to get valuable advice and experiences that will help you in your investing journey. Learn from credible people who have done it before. However, it would be best if you also started to shape good financial habits such as saving and budgeting because that is your starting point towards becoming a better and responsible adult.

Moreover, you don't have to copy everything you learn. Instead, you can modify it and align it to yours so it fits your needs.

Lastly, you don’t have to do everything flawlessly; you just have to do it the right and smart way.

Gain advantage of time and compound interest.

We can’t emphasize this anymore. When you are young, time is on your side. And in investing time and compound interest is your best friend.

Essentially, compound interest is when the earned interest on your initial investments gain another interest, and another interest, and another interest! It’s like earning interest on top of your interest earned. 

Hence, you can be aggressive when you are young because of the long time horizon to recoup your inevitable losses. Plus, it’s most likely you won’t be withdrawing for years, not to mention the prospect of gaining tenfolds of your initial investment.

But if you’re older, most people are conservative in their investing strategy. This is because age affects investment. When you’re young, you have more opportunities to recover from sudden market crashes, earn more money, and work. Unlike when you’re at retirement age, you should take less risk because of the limited earning capacity and time gap.

What can I invest in to make money as a teenager? 

You can start with a Custodial Traditional IRA or a Custodial Roth IRA if you are a teenager. Since the legal age, most brokers accept is 18 years old and above (or 21 depending on the state), you can ask your parents to open an account on your behalf.

Make an arrangement with them to share or match their contribution by working part-time during summer. Aside from that, you can also join some side-hustles online and earn extra money on the side to add to your investment.

But the best investment for teens out there is financial literacy. You must gain exposure, additional knowledge, and skills before you dive deeper into any investment scheme you will participate in. Likewise, reading investment books would be of great help.

Moreover, seek professional guidance if necessary, and ask for support from your parents to teach or assist you. But if you have an idea of how things work, then go ahead and apply what you learn.

How can I invest if I'm under 18? 

You can start with good old knowledge acquisition. Start with constantly adding knowledge and skills so once you're ready to start making your first millions, you are aware of how the market works, what to avoid, and play it in your field.

Then there's the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA).

Essentially, these two are a type of custodial accounts with only slight differences. As a result, the UTMA and UGMA are great alternatives for parents who aren't sure of their child's intent after high school.

Both have no contribution limits, so you can ask your relatives and even your friends if you want to deposit funds in these accounts.

The main difference is that UGMA invests in the assets most people invest in, such as stocks, bonds, and mutual funds. On the other hand, UTMA allows more assets, including physical assets, such as real estate, art, and cars.

Can I invest as a 16-year-old?

Legally, you can't. This is because most brokers have set rules for anyone who wants to invest or use an investment account. While the legal age varies, most states consider 18 or 21 legal age for teens.

What you can do for now is to gain knowledge, skills, and experience. You can also ask your parents to open a custodial account and ask for help to pay for funds or contribute on your own. Then you will have access and can manage it once you're at legal age.

Furthermore, anyone may contribute up to $15,000 tax-free. Anything beyond this amount triggers a tax liability. Also, the first $1,050 in earnings is tax-free, and the next $1,050 in earnings is taxed at the ‘kiddie tax rate‘.

Lastly, any earnings over $2,100 are taxed at the parent's tax rate.

The Bottomline

Investing doesn't only revolves around monetary or paper assets. So even if you're a teenager, you can start opening one of these best investments for teens.

And if you're a parent of a teenager, you can teach your kid about the best investments for teens out there and valuable life lessons on finance.

While there are many traditional options to choose from, don't forget that investing in knowledge is of utmost importance. Moreover, it's good to know that you are setting yourself up for financial success while young.

Because when you're young, you can have all the benefits of time, not to mention compound interest.

So, happy learning and investing!