Teenagers have many things to think about. And in this day and age, in times of sky-high house deposits and eye-watering tuition fees, money is more of an issue than ever. 16-year-olds looking for a way to invest can put their money into a Junior Stocks & Shares ISA. 18-year-olds have the option to open an adult Stocks & Shares ISA.
How to Invest as a Teenager in the UK
But whatever’s on your mind, one of the greatest assets you have when it comes to money is time.
Yup, you have a whole lot of time ahead of you and that is one of the key factors in your favour if you want to start investing.
Taking the time to learn about investment accounts, stocks and shares or index funds must come pretty low on any teens list of priorities. But putting even a small amount away could pave the way to a bright financial future.
how old do you have to be to invest in stocks in the UK?
The minimum age that someone in the UK can hold stocks or shares in their own name is 18. But teens don’t need to wait until they’re 18 to benefit from investing. A Junior ISA (covered later in this article) can be opened for a child from birth. The money in the account is the property of the child although the parent or guardian manages the account until the child can do so.
best way to invest small amounts of money In the UK
There is no right or wrong way to go about investing. And the massive array of choices on the market today means it’s easier than ever to get started with small amounts (or premiums). Many stocks and shares ISAs can be opened from as little as £10 per month.
Mobile trading apps are becoming more popular too and a Trading 212 account for example can be opened for as little as £1. Read our Trading 212 review here to find out more.
An Interesting Story About Benjamin Franklin
Here is an interesting tale to illustrate the power that having lots of time at your disposal can have on your finances. In his will, the famous President of the US, Benjamin Franklin left £2,000 Sterling to be split between the cities of Boston and Philadelphia. But with one stipulation. That the money could not be accessed for 200 years. He died in 1790 and true to his word, the money was not touched until 1990 when, thanks to, among other things, compound interest, it had grown to $6.5 million. The full story is here.
Investing and the Stock Market
Getting a grip on your finances early in life doesn’t have to involve studying the financial times or stressing over the stock market. But even going to the bother of investing a few pounds a month at this early stage in life could give you valuable insight into the power of investing and the stock market.
And in this internet age, it’s easier than ever to find out the information you need to get started and to open a plan that is right for you.
Firstly it is important to distinguish the differences between saving and investing.
A savings account works much in the same way your average bank account works in that your money accrues interest. However, you may have noticed that interest rates are very low.
Or you may not have.
Low Interest Rates
As interest rates in the UK and US have been at historically low levels since the global crash of 2008. If you are indeed a teenager, then you won’t remember that far back. Or at least you certainly won’t have been following interest rates.
At the time of writing, the US Federal Reserve’s most recent interest rate shift came in October 2019 when it was lowered to 1.5%.
Although it is not as low as it has been, it is still historically very low which is bad for savers.
Historically, the US is a great place to look to if you want to predict how UK interest rates will go.
Generally speaking, the UK follows the pattern of the US financially, and this may be even more pertinent in the wake of Brexit.
But what options are available to you? And how would you even get started?
I am going to talk about two products that I am most familiar with. ISAs and Junior ISAs.
iSAs for 16 year olds
Junior ISA (Stocks and Shares)
Many teenagers may already have a Junior ISA. It’s not something they can open themselves. It’s something only a parent or legal guardian is allowed to open. They can be started from birth and can be opened until the child is 18.
However, the child (or teenager) can manage the account from when they are 16 years old.
So, check with a parent and if you already have a JISA in your name, this could be a great place to start a lifetime of investing.
As mentioned – when the child is 16, they can manage the account. You could start from £10 per month, or if this is too much, maybe you could arrange with a parent to put in what you could afford. The fun part could be logging into your account and seeing how your plan has grown since it was started and seeing the effect of your contributions.
Stocks and Shares ISA (Investment ISA)
The JISA’s big brother is the ISA. (By the way, ISA stands for Individual Savings Account). And you can open an ISA from the age of 18.
Again this works in a very similar way to the Junior ISA being, effectively, a tax-free ‘wrapper’. One of the main differences is the annual investment limit is £20,000 whereas the JISA limit is £4,368.
Whatever way you decide to go, remember that time is on your side and starting with just a small amount could be a wise move.
It’s also advisable to stay away from credit cards. No matter how appealing the introductory rate seems.
Try using this calculator to see the effect that investment growth can have on a long term investment plan such as a Junior ISA.
Invest In Yourself
Investing isn’t always about finances or the stock market. Perhaps one of the best investments a young person can make is in themselves.
But how would one go about this?
There are almost unlimited ways to invest in yourself.
Here are just a few ideas:
Work hard at school.
This is perhaps the most obvious, but also the most difficult. Young people are constantly told to get their heads down and work hard at school. But it’s not always easy, and the rewards can seem so far in the future that they are almost intangible. At least for some young people, and certainly for me when I was a teenager.
But this can’t be emphasised enough. A great set of GCSE or Higher results can pave the way to a life where many doors are opened to your aspirations.
Even a fairly middling set of results, though, can be a requirement for entrance to countless jobs or further education courses.
The alternative can be extremely grim. Most teens spend a vast amount of time in school, college or university.
So it can really pay back big time to listen and get stuck in. You won’t get a second chance!
Get good at something
In this day and age, there are more opportunities than ever for young people to learn a new skill or hobby and really invest in their future.
Yes, I’m talking about YouTube.
It’s easier than it ever was to find really top-level tutorials on lessons from everything to playing football, learning the guitar, playing your favourite tunes on the piano or painting a landscape in watercolours.
It’s all out there, and lessons and guides that might have cost hundreds or thousands of pounds in person or on videotape are now all, quite incredibly, totally free.
I played the guitar as a teen and at the beginning, my progress was painfully slow. All I had was some beginning guitar books. But I was determined and I stuck with it. O can only imagine how different it would have been with YouTube at my disposal.
Taking an interest in a hobby or sport and getting really good can be hugely rewarding and can lead to future friendships and adventures that can be life-changing in the best way possible.
When I was younger, I remember reading a few books that I really loved, but I never had a passion for reading.
It was only when I got into my twenties that I really started to love reading.
And again, it’s easier than ever to get hold of pretty much any book you want.
A Kindle allows anyone to download the opening few paragraphs of a book to see whether they like it or not. If that isn’t the gateway to unlimited knowledge then I don’t know what is.
Reading had so many benefits for the young mind.
Learn for textbooks or non-fictional informational books on any subject you can think of.
But reading fiction is also hugely enjoyable and beneficial.
The other great benefit of reading is that it can keep teens off their mobile devices. And that can’t be bad at all.
Jim going to recommend a few books here that might be particularly interesting and enjoyable to the young person who wants to learn about life and business. These books are not heavy going manuals or tomes on business ideas. They are hugely entertaining and informative and their writers really have been there, done that and got the t-shirt. So why listen to me? Listen to what these guys have to say.
How to Fail at Almost Everything and Still Win Big By Scott Adams
Scott Adams, if you didn’t know is the artist and writer behind the hugely successful Dilbert comic which is still syndicated in newspapers across the US and the rest of the world.
You can also subscribe to his email newsletter or visit the Dilbert website to read the latest strips.
They are perhaps not that relevant to teens. They are really written for anyone who has worked in a workplace with annoying people that they really don’t like. Which probably makes up most of the Western world.
Anyway, Scott has written this amazing book which details his rise to fame and riches.
I enjoyed reading about the really stupid decisions he made asking the way such as the time he went for a job interview in the middle of winter wearing only a thin shirt and got stranded in a snowstorm.
It also tells us about the lucky breaks he gets along the way and how they changed his life.
For a young person who wants to read about life, luck, work and incredible stupidity, How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life is tremendous and very funny.
The Strangest Secret by Earl Nightingale
Earl Nightingale was an American businessman and entrepreneur. Back in the nineteen fifties, be toured the country doing a lot of speaking to business groups and the like about how to get ahead in life and in business.
His talks were so popular that he started to get requests for recordings of his talks.
So be decided to cut a record of his talks and press a few thousand copies only in order to hand them out at his talks.
The recordings became so popular that he ended up not only seeking millions of records but also creating the self-help publishing industry almost as we know it today.
Don’t worry too much about since of the overly biblical themes. The lessons and principles he teaches are timeless and should strike a real chord with any teenager about to start out on their journey in life.
Get a Job
Nothing will teach a teenager about the realities of work and money than being an actual job.
My very first job was as a paperboy for a news agent called RS McColl. For the first few days, I shadowed the paperboy who was leaving so he could impart his knowledge to me.
Then my first morning flying solo as it were was a bit of a disaster. I had to deliver newspapers to a row of fancy houses near the park.
The newspapers had the house Street and number written at the top.
However, as I approached the gate post, I couldn’t see a number, only a name. A house name
I was bemused. I had no idea that houses had names. (We lived in a tenement flat).
I returned forlornly with a pile of papers from the big houses muttering that I couldn’t deliver them because the houses had no numbers on them.
Here’s where I should have used a lesson I have since learned. If someone (a boss) asks you to do something, just do it.
Don’t ask why where or when.
Just do it to the best of your ability. I should just have chucked the newspapers into the best house I could think of (or ask someone, but it was a Sunday morning).
If a boss asks you to do something, they just want it done. Yes, they want it done properly, but more importantly, they don’t want a load of questions. They’ve probably got other things to do.
This also comes under the category of “Ask for forgiveness, not permission”. This is another great saying similar to “Just do it.”.
Anyway, my next job was packing shelves at a local supermarket. As far as I remember I earned £14 per week for three shifts of the hours. Which works out to about £1.55 an hour.
What did I do with my cash? I saved it up and bought my first electric guitar. Which ties in quite neatly with an earlier section of this post.
The point of this section is it can be great for a teenager to invest some of their time in doing a part-time job.
It can teach a teen how valuable money is and what it takes to earn it. And that is a terrific lesson to learn.
How do I get started investing as a teenager?
Two ways a teenager can start investing are:
- Under the age of 18, a parent or guardian can open a Junior Stocks & Shares ISA for a child
- From 18 years old, a teenager can open an adult Stocks & Shares ISA
What’s the best age to start investing?
There is no best age to start investing, but generally speaking, the earlier you start, the more chance your money has of riding out the short term ups and downs of the stock market and making some long term gains.
Can a 16 year old invest in stocks?
A 16 year old can invest money if their parent or guardian opens a Junior Stocks & Shares ISA for them. From the age of 16, the child (teenager) can manage the JISA. At the age of 18 the Junior ISA becomes a full adult ISA.
This article is for information purposes only and does not constitute advice.