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They say youth is wasted on the young, but when you apply that to investing, the opposite is true.

In fact, youth is on your side when it comes to investing. Developing good money habits early on in life is vital. It will set you up for financial success throughout your career and personal journey.

If you begin when you’re young, time and compounding are your most important assets. Why, exactly? Well, compounding is the process of your money growing exponentially, or snowballing, over time.

Say, for instance, that you put $1,000 into the stock market with the best stock apps, assuming a 6% annual return. That means that the following year, it will be worth $1,060, and the year after, $1,123.60.

With compounding, you make money on the initial amount you put in, or the principal, and on the interest or gains each year thereafter. Essentially, you’re earning gains on gains.

Everyone Can Benefit from Compounding

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The benefits of compounding apply to virtually all families. Start contributing $10 per day to your child’s college savings account when they are one (assuming a 6% annual return), by the time they’re 18 they would have $119,655 saved. That’s real growth!

As you can see, it doesn’t take much effort for your money to grow over time, and investing apps for kids are key to building meaningful wealth.

For parents, one of the easiest ways to begin educating kids about investing is to make it fun and to look for teachable moments.

For example, open a child bank account with a debit card for your child. Some of the best debit cards for teens like Greenlight offer parental controls, investing options and savings goals development.

If you want to skip the debit card and go purely for a banking app for kids, you can work through a traditional or neo bank such as Chime, and for a custodial account, consider opening a UNest Investment Account for Kids.

UNest is an app that makes it easier than ever for parents to open a tax-advantaged investment and savings account for their children.

If you’re not familiar with a custodial account, it is a financial account that an adult controls, generally a parent or a legal guardian, for a minor.

These types of accounts offer enormous flexibility in what you use the funds for, and they can make for a wonderful, highly educational gift for your child.


Good Money Habits that Last a Lifetime

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Another idea is to set an allowance for chores. Decide on a reasonable amount your child will receive each month for completing specific tasks.

This will teach them healthy wealth building habits early on and incentivize them to work.

You could even go a step further and empower them to negotiate a raise by taking on additional jobs or responsibilities.

You often have more impact instilling money habits when done as an interactive process. Leverage technology.

There are a myriad of investing apps for minors, products and educational tools available to children and teenagers looking to start investing.

These options can teach them about personal finance and encourage learning. Gamifying these lessons is also a fun way to instill these vital skills.

By making this important aspect of their life fun, not only will children enjoy learning about money, they’ll internalize these lessons, giving them a financial head start in life.

As children grow and mature, particularly as they reach their teenage years, this presents another opportunity to teach them about personal finance.

At this point in their lives, they may begin to earn their own income, whether it’s from babysitting, a summer job or a side hustle, and they won’t know the first thing about what to do with this new found money.

Instead of letting them blow it on something that will only bring short-term gratification, encourage them to put it in the best investments for teenagers and include them in the process.

Demonstrate how investing now can pay dividends later by setting goals for teenagers.

Work with them to establish a list of things to save up for as a teenager and why delaying gratification can often result in better decision-making in the future.

Custodial Accounts Act as a Gateway to Investing

Since you still have to be 18 to invest in the stock market by yourself, you can overcome this hurdle by opening a custodial account.

With a custodial account, parents can gift their children things like free stocks and bonds or real estate without major tax consequences.

Once they are of legal age, which can be anywhere from 18-25 depending on the state, the account transfers to the beneficiary.

Let’s say you decide to invest your money in the stock market and you want to include your teenager so they learn the basics of investing.

For a first-time investor, I would advise against picking individual stocks. Instead, I recommend index funds.

Historically, over the long-term, these types of investment vehicles tend to outperform other kinds of mutual funds.

Additionally, they are low-cost, meaning you won’t pay a premium for a professional stock picker or manager, and they are tax-advantaged and well-diversified.

It’s important to understand that when you invest in stocks, you don’t want to put all of your eggs in one basket. Hopefully, you only invest in appreciating assets.

This way, if one stock goes down, you have other investments to balance out the loss.

You must also consider fees. If you’re not careful, fees can greatly eat into your returns.

With most index funds worth investing in, you typically face low-to-negligible fees.

Kids Come First

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I know what you’re probably thinking: Shouldn’t parents plan for retirement or make sure they have an emergency fund before saving for their kids?

Contrary to popular belief, and even with the strain of the pandemic, parents’ number one goal is still saving for their children.

In fact, according to a Harris Poll/UNest Survey, 93% of parents with kids under 17 would make a self-sacrifice if it meant their child would have a healthier nest egg.

What’s even more surprising about these findings is that among parents with young kids (under the age of 17), 44% consider their children as the most important savings goal.

Yes – ahead of building an emergency fund, saving for retirement or buying a home.

That’s why opening a UTMA custodial account with a company like UNest is not only smart, parents see it as essential for setting kids on a sustainable financial path for all of life’s stages.

With UNest, it’s easy to plan for your child’s financial future. The app provides financial planning, recurring, automated contributions, unlimited gifting and unique rewards and age-based portfolios that invest in index funds.

Technology makes it easier than ever before to make learning about personal finance fun and simple.

I recommend taking advantage of this investing app for beginners to give your children a leg up on their financial future.

If you walk away with anything from this article, the earlier you start teaching your children healthy money habits, the better.

This means investing early and often in index funds and contributing regularly to your investment account so that you can take advantage of compound interest to fund all of life’s expenses. And, of course, it’s never too late to start!

About the Author

Riley Adams is the Founder and CEO of Young and the Invested. He is a licensed CPA who worked at Google as a Senior Financial Analyst overseeing advertising incentive programs for the company’s largest advertising partners and agencies. Previously, he worked as a utility regulatory strategy analyst at Entergy Corporation for six years in New Orleans.

His work has appeared in major publications like Kiplinger, MarketWatch, MSN, TurboTax, Nasdaq, Yahoo! Finance, The Globe and Mail, and CNBC’s Acorns. Riley currently holds areas of expertise in investing, taxes, real estate, cryptocurrencies and personal finance where he has been cited as an authoritative source in outlets like CNBC, Time, NBC News, APM’s Marketplace, HuffPost, Business Insider, Slate, NerdWallet, Investopedia, The Balance and Fast Company.

Riley holds a Masters of Science in Applied Economics and Demography from Pennsylvania State University and a Bachelor of Arts in Economics and Bachelor of Science in Business Administration and Finance from Centenary College of Louisiana.