One of our core goals at The Motley Fool is to help people become great investors, and the earlier a person starts on that path, the better their long-term results are apt to be. That’s why we consider it a smart move to get your children — or any younger relatives — involved in stock picking long before they’re really likely to be thinking about the future. Of course, not everyone’s parents get their portfolios rolling when they are infants, or even grade schoolers.
In this Rule Breaker Investing podcast, David Gardner has gathered a whole panel of Fools to discuss the best ways to get started guiding your young relatives into the wide world of Wall Street. Gardner, Naima Barnes, Daniel Masseca, Robert Brokamp, and Jason Moser will offer up tips, advice and a host of personal anecdotes. In this segment, they talk about what the 18- or 21-year-old in your life ought to be doing — from contributing to a 401(k) to opening an IRA to getting out there and choosing their own portfolio, and more — as well as some things that mom and dad may want to help out with.
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For anyone who wanted a video about how to invest as a teenager, or what to do when you turn 18 years old – here is that video, enjoy! Add me on Instagram: GPStephan
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FIRST: GET A CREDIT CARD
Doing this is VERY easy – as a first credit card, I highly recommend The Discover It Secured Card.
All you need to do is put down a small deposit, and they will give you a credit card with a limit equal to that amount. To build your credit, all you need to do is put a minimal amount on the credit card each month, then pay it off in full to avoid paying any interest. It’s as simple as that, the entire process should take you less than 15 minutes to do.
SECOND: GET A BANK ACCOUNT
I think it’s incredibly important that you have a bank account that’s solely in your own name, that ONLY you have access to – this is just one step closer to becoming a productive, financially responsible adult. Again, this step is just about learning how to manage money on your own, and eventually becoming an independent adult who can support themselves financially…and smash the like button.
THIRD: GET A ROTH IRA
A Roth IRA is a tax advantaged retirement account that lets you contribute post tax money…meaning taxes have already been taking out of what you earned…and by the time you’re 59.5, all the PROFIT in that account can be accessed completely tax free.
FOURTH: STAY OUT OF CONSUMER DEBT
I’m not referring to a low interest rate mortgage on a rental property, or any type of leverage that makes you more money…instead, I’m referring to credit card debt, expensive personal loans, high interest auto loans, or ANY other type of loan that serves no purpose other than to make your life awful. The responsible way to handle purchases is to only buy things that you can afford, put it in a credit card…and then PAY THE CREDIT CARD OFF IN FULL before its due.
FIFTH: GET A JOB
I sound like some old man saying this, but no joke, if there’s ANYTHING that set me up for a successful future, and that got me started on the right path early in life…it was this. GET A JOB. Anything. Even if it’s a few hours per week, JUST GET SOME WORK EXPERIENCE. Doesn’t matter how much money you make, just work…the experience that you’ll get from a part time job will be worth it 100x over by the time you’re older.
SIXTH: LIVE BELOW YOUR MEANS
Do not buy stupid stuff to impress people who don’t matter. Do not waste your money on things that aren’t going to benefit you long term. I’m a firm believer that it’s totally okay and acceptable to live SUPER cheaply in your 20’s, to set up the rest of your life to live comfortably.
SEVENTH: DONT GO TO COLLEGE JUST TO GO TO COLLEGE
Here’s my solution: if you don’t know what you want to do with your life, either go and get work experience until you figure it out – or go to a 2-year community college part time while you work. This way, you can save a TON of money – you can continue working at the same time – and that gives you more time to figure out what you really want to do.
EIGHTH: INVESTING ADVICE FOR TEENAGERS:
For most people out there, just invest in a broad low-cost index fund, invest consistently, and invest with the expectation of holding it for the next 30-40 years. That’s literally it. An index fund like FZROX, VTSAX, FIAX, or a target date retirement fund through Vanguard would do the trick. If you just do this one investment, chances are, this will become you full retirement when you’re older.
Now, If you ARE going to take on more risk, while you’re young is the time to do it. If you want to start that business, DO IT. If you’re successful at it, then you’re further ahead financially. Either way, you win…even if you LOSE, it’s better you lose a small amount when you’re 18, then a LARGE amount when you’re 35.
So don’t let those mistakes be made in vain…if everyone can learn from what I did wrong, then at least my mistakes went to a good purpose.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
If you’re looking to diversify your investment portfolio, you’ll surely consider buying some stocks, be it in the UAE or abroad. And if you’re risk-averse, a financial advisor is likely to suggest you invest more in bonds.