If you are a teenager – or if you have a teenage son or daughter – investment might be fairly low on your list of priorities. There are plenty of other ways to spend money, most of which offer more instant results.
But time really is money, and with the wonders of compound interest, the sooner you start making money work for you, the more it could grow.
Investing can sound daunting, but in fact, starting to invest can be as simple as opening a savings account, could offer much better returns, and you can get started with as little as say, £50.
What’s more, you are never too young to start. At Continuum, we are looking at how to be a teenage investor.
What exactly is investing?
Savings are easy to understand. You put cash in a savings account and it earns interest at a steady and predictable rate. It is safe. The Financial Services Compensation Scheme will protect the first £85,000 held with any one bank or building society if it goes bust.
But interest rates are now so low, returns from savings accounts are hard pressed to keep up with inflation. For most people, investing now represents a better way to use and grow money.
With investment, your money is used to buy something, often shares in a company. You could enjoy returns if the company pays dividends to shareholders, or grow your capital if the value of the shares you hold goes up.
If you have questions about investing, we could help you find some answers with a free initial discussion.
Investment means some risk. The companies you invest in could fail, and you could lose money – but in return for the risk, you stand a good chance of making more than savings will offer. Investments can rise or fall, but the chances of profit if you invest for at least five years may be good.
You need to be 18 to buy shares – also known as equities – directly on the stock market. However, your parents or guardians with parental responsibility, can open and manage a Junior Stocks and Shares ISA (or JISA) on your behalf (the money invested still belongs to you) and at the age of 18 you could take control of this account. This is a proper ISA, with all the usual tax advantages. This means that you pay no income tax, however much you make on your JISA investment, and you can enjoy the money you make with no Capital Gains tax when the time comes to cash it in.
Contributions up to £9,000 can be paid into your JISA in the 2021/22 tax year, and when you turn 18 your JISA can convert to a full ISA, and invest up to £20,000 in an adult Stocks and Shares ISA.
One of the big advantages of investing in a fund is that you don’t need to be an expert, or even to pick your own investments as they will be managed by a fund manager. However, speaking to our expert Independent Financial Adviser’s is key.
Investments do not have to be made with a big lump sum, and putting (for example) £50 into an investment fund each month makes investment as simple as saving. It also helps to smooth out fluctuations in the market and can lead to better returns overall.
Building investment expertise
ISA investment may provide a sound base, but there is a lot more to discover if you catch the investment bug. Discovering how to select funds or particular companies, understanding the market and the different sectors and asset classes, building a diversified portfolio and how to balance risk with potential reward all make investing exciting, whatever the age of the investor.
Getting your children’s finance off to a good start can be easier if your plans for them fit in with those you have made for yourself. To discuss family financial planning, call us now.
If you or someone you know is ready to become an investor, we can help. Subscribing to our free award-winning newsletter could be a good place to start, but getting some expert help from a Continuum adviser could be invaluable.
The Financial Conduct Authority does not regulate deposit accounts.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
Equity investments do not afford the same capital security as deposit accounts.