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Teenagers can legally get a job once they turn 14 years of age. At this time, they can begin saving. Saving itself won’t be enough to reach large financial goals, such as paying for college or buying a house. Investing is the next logical step.
Money Market Account
Money market accounts work almost the same way that savings accounts do, but they yield a higher interest rate. Once your teen reaches $1,000 in his savings account, you will want to take him to the bank to have the money transferred to a money market account.
Mutual Funds
Once your teen has some money set aside in a money market account, you can introduce them to mutual funds. Mutual funds are not guaranteed like money market accounts, but they are less risky than the stock market. Mutual funds are a collection of investments that are funded by many investors. Set your teen up with a broker and create an account together. Allow your teen to make regular deposits in to the mutual fund based on your suggestions and the recommendations of the broker.
Stock Market
Playing the stock market is just as risky for a teen as an adult. If you allow your teen to get involved in the stock market, start out small. Take time to study the history of each company before choosing which shares to purchase. Your teen will not be able to participate in trading on his own, but you can do it for him. You may also want to get some professional council to fully understand the stock market before you continue.
In conclusion, it is best not to allow your teen to put all of his eggs in one basket. Monitor his investments as you teach him how to make wise choices. Then, when he is 18 he will be ready to venture out in to the financial world on his own.