Investment for Minors: Building Wealth Before Turning 18

In many communities, people only learn how to build wealth when making money. Often, that’s after they graduate college or anytime they start earning wages. While it’s easier to grow your wealth with your own income, you don’t have to wait until that stage in your life. You don’t even have to turn 18 first.

If you save your allowances and loose change, you can easily make hundreds of dollars every year. What do you do with such an amount of money? Many teens spend it on something they’ve been eyeing, like a new iPhone or branded clothes. But what if you can invest it and earn a hundred more dollars in a year?

Individuals below 18 years old aren’t allowed to invest. But there’s a way around it. The law states that teens under 18 can’t invest on their own. As such, you can invest with the supervision of an adult. In some countries, like the Philippines, minors can invest in stocks through an In Trust For (ITF) account. It’s a custodial account opened by their parents or legal guardian. Many Filipinos use ITF accounts to build savings for their children’s college education.

Now that we’ve settled that, let’s run through the investments you can make before turning 18:

1. Stocks

Stocks are shares of a publicly listed company that investors can buy. When you buy a company’s stocks, you become part-owner of that company. As such, you are entitled to dividends, or the payout of your stocks, when the company distributes them.

For beginners, the best stocks to buy are those from stable companies. That’s because their values are less likely to drop when the economy becomes volatile. In the Philippines, stable companies are called “Blue Chip” companies. Dozens of companies are considered a blue chip, most notably Metropolitan Bank and Trust Company (Metrobank), Globe Telecom, Jollibee, and Ayala Corporation.

Investing in blue-chip companies is great for long-term returns. In fact, stock investing, in general,is designed to fulfill long-term goals. They yield the greatest returns after a number of years, though they come with high risks. But in investments, the biggest risks can result in the most significant rewards.

Find a stockbroker before investing. They’ll orient you about the comings and goings of the stock market. They’ll also give you advice on how to trade or when to buy.

2. Bonds

Investors who deal with stocks often buy bonds as well. Bonds are issued debts that earn interest over time. Hence, buying a bond is essentially lending your money to another entity, which would pay you back with interest.

Bonds can be issued by companies, governments, or publicly-owned utilities. Government-issued bonds offer the lowest risks because they are the least likely to default. Hence, it’s recommended for first-timers.

There are also bond funds, which are mutual funds or exchange-traded bonds. They’re a portfolio of multiple bonds. So, when you buy a bond fund, your money is then invested in other bonds and debt instruments, like mortgage-backed securities. For many investors, a bond fund is a more efficient way of buying bonds than buying an individual bond. That’s because bond funds pay out interests every month and are managed by a fund manager, who ensures your investment is purchased and sold according to market conditions.=

3. Time Deposit

If you choose not to take risks, which inevitably come with stocks and bonds, consider a time deposit. It’s a deposit account in a bank that keeps your money for a specified period. On its maturity date, the money you deposit would have already earned interest.

You can invest as little as $20 in some time deposit accounts. Its interest rates are fixed, so your earnings stay stable even if the economy declines. However, because of its lower risk, its returns are also lower than those from stocks and bonds.

4. Small Business

What’s good about investing in a small business is that you’d have more control of your money. You can choose how much capital to raise, what kind of business it would create, and how you’d grow it.

Capital can also be as little as $20. That can buy you a bulk of inexpensive products to sell. As for your business’s location, you choose the internet so that it’s free. Creating a Shopee or eBay account doesn’t cost anything. The only things you’d pay for, apart from your products, are the registration fees of your business. Once you’re settled, you can start selling and earning revenue. Your profits will come after some time, but the wait won’t be a long as the wait for dividends and interest income. And the best part is, you don’t need a custodial account before starting your small business.

Learning how to invest before turning 18 will bring you closer to your financial goals in adulthood. If you did it right, you might even become a millionaire before 30.

  • JohnSmith

    JohnSmith is a writer, website created to provide the latest information in all fields: economics, culture, society, health, technology ... If you see interesting articles please share them. Thank you! Contact: admin@newsdailyarticles.com Admin: newsdailyarticles.com

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