With the rise of financial technology, there are now many excellent apps that allow teenagers under 18 to start investing in stocks and funds. By starting young, teens can take advantage of compound interest and build long-term wealth. This article will introduce some of the best investing apps for teenagers and provide tips on how to invest wisely as a young beginner. Proper financial education and parental guidance are crucial for teenagers to develop healthy money habits and avoid risky speculative trading. With the right approach, investing can be an enriching experience for teens under 18.
Popular investing apps provide fractional shares and automated tools
Many brokerages now offer fractional share investing, allowing teens to buy slices of expensive stocks like Amazon or Alphabet with as little as $1. Platforms like Robinhood, Stash, Acorns, Invstr, Stockpile, and Fidelity Youth Account enable under 18s to invest small amounts in brands they know and love. These apps also have educational content and automated tools like round up investing and dividend reinvestment suited for beginners. Low fees, parental controls, and easy onboarding make them appealing to teenagers.
Develop healthy habits by focusing on long-term ETF investing
While it’s exciting to trade individual stocks, teens should focus on building a diversified portfolio using broad market ETFs that track indexes like the S&P 500. Platforms like Vanguard, Charles Schwab, and TD Ameritrade allow investing in ETFs like VOO and VTI commission-free. Investing small amounts monthly in these funds teaches discipline and the power of compound returns over decades. Parents can set up auto transfers to fund the investment account regularly.
Understand risks and avoid speculative trading of options, margins
Teens need to be aware of the risks in speculative trading of options, margins, and volatile meme stocks. The point is to develop patient habits, not chase quick profits. Parents should have open conversations about money management, setting realistic return expectations, and resisting peer pressure to make imprudent trades. Using paper trading accounts to simulate real markets is recommended.
Take advantage of retirement accounts like Roth IRA
Once they start earning income, teens can open Roth IRAs to enjoy decades of tax-free growth. Many apps allow opening these retirement accounts with low initial contribution requirements. For 2023, up to $6,500 can be contributed annually to a Roth IRA account, which grows tax-free for retirement. Teens should contribute what they can annually to maximize this powerful wealth-building tool.
With the right parental guidance, investing apps can help teenagers under 18 learn money management, understand markets, and harness the power of compounding. By focusing on regular ETF investments and retirement accounts, young investors can develop habits to build long-term wealth.