Why it is Important to Teach Teens About Investing Early
investing-my-money | Read Time: 3 minutes
By James G. Everlof, CRC® | Published: August 2021
During the teenage years, lots of exciting things happen in life like getting your first job and earning money; this time is an opportune time to coach and guide children on the importance of saving and the best ways to save. It is also never too early to begin discussing retirement with teens. Many companies allow part-time workers to contribute to their employer sponsored 401(k) program.
Here are a few things to consider when helping your teen with money management and investments.
- Find the Right Banking Partner. Visit a community bank and open a personal checking and savings account for your teen. The checking account will serve as the teen’s spending account and the savings account will be used to put money aside for future goals. Work with your teen to develop a plan to determine what percentage of their paycheck will go into savings; it is recommended to start with 20% of their paycheck for savings.
- Teach Them the Benefits of Investing Young. Introduce the basics of investing early on. Opening an online brokerage account is fast and easy. If your teen is under 18 years old, you will need to open a custodial account. You and your teen can begin by investing in mutual funds, ETFs and have a little fun picking out a few stocks they can afford to buy. Let your teens research some companies and walk them through how the market works.
- Discuss Higher Education Plans. Planning for your teen’s future is critical. Whether it’s college plans, working at the family business or attending a trade school, teens should understand that financing higher education can be expensive. Encourage them to limit student debt that will be hard to repay in the future.
- Plant the Retirement Seed Now. For a teen, retirement may seem very far off. Parents can use this time to discuss the concept of how planning for retirement now will have huge benefits because of the value of compounding earnings. For example, if a 17-year-old contributes $1,000 to an employer sponsored 401(k) plan now, it will grow to $19,943 at a 6% return by the time the teen is 67 years old. That same $1,000 invested at 37 years old at a 6% return will only grow to $6,024.
According to a WSFS Bank Study of Millennials and Gen Z consumers, when it comes to financial literacy, 61% of respondents agreed that most of what they’ve learned about finance was through osmosis. Fifty-eight percent of respondents said they actively avoid thinking about or navigating their finances out of fear that “they’ll mess it up.” It is important to teach teenagers money management early on and to make sure they are saving and investing that money, so it grows for them. Explaining the value of money, savings and investing and what it buys — like homes, vacations, and the freedom that brings — will help them see the rewards of making good money choices.
About the Author – James G. Everlof, CRC®
James G. Everlof is a financial advisor with WSFS Wealth Investments and offers securities and advisory services as a Registered Representative and Investment Advisor Representative of Commonwealth Financial Network®. He graduated from the University of Pittsburgh with a Bachelor of Arts in History & Political Science. Mr. Everlof can be reached at firstname.lastname@example.org and is located at 1571 Chester Pike, Eddystone, PA 19022, 215.864.3567.
The financial advisors of WSFS Wealth Investments offer securities and advisory services through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. WSFS Bank and WSFS Wealth Investments are not registered as a broker-dealer or Registered Investment Adviser. WSFS Bank and Commonwealth are separate and unaffiliated entities. Fixed Insurance products and services are offered through CES Insurance Agency.
Investments are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. Funds are subject to investment risks, including possible loss of principal investment.
Last year, many Americans stockpiled cash to prepare for the uncertainty of the COVID-19 pandemic. So much so, the personal savings rate for Americans reached record levels. The U.S Bureau of Economic Analysis (BEA) reported that the savings rate for Americans was up to 33% in April 2020, the highest ever reported by the BEA.1 Coming into 2021, the savings rate for Americans has come down as the economy reopens with consumers unleashing pent up demand. However, even with higher spending compared to 2020, Americans continue to exhibit elevated saving rates compared to pre-pandemic levels.Read More
Is the traditional 60/40 portfolio being challenged by a new paradigm? That architype relates to the historically negative correlation between bonds and equities. This year the two major asset classes have experienced a positive correlation, move in the same direction, causing investors to wonder if this type of environment will last longer. If it does, this could be a great opportunity to introduce alternative strategies into a portfolio. We believe this strategy can help you meet your overall goals while maintaining the overall risk profile of a portfolio at its desired level.Read More
The markets and the economy are ever-changing, making it hard to keep up sometimes. Let WSFS help you make sense of it all. Tune in to our Market Minute update from Andrew N. Davis, CFA®, Director of Research at West Capital Management, a subsidiary of WSFS Financial Corporation.Read More
A stock market crash is simply a sharp downturn in prices that can happen swiftly and often with no notice. They have happened for centuries, and we will continue to experience them. A decline of 30%-40% is not unprecedented and can invoke fear, causing us to act unlike ourselves. We may even inadvertently throw our financial plans off track, which is where a good financial adviser can be invaluable.Read More
Inflation is the rate at which the cost of goods and services rises over time and can affect almost any good or service: food, housing, utilities, entertainment. As inflation rises, the purchasing power of consumers is diminished because over time inflation adds up, the value of the dollar declines, and consumers are forced to spend much more for the same basket of goods and services.Read More