Investing for young people: can you invest when you’re underaged?
Especially when you are young, it’s interesting to start investing. But what is the minimum age to invest, and what should you consider when investing? In this article, we’ll dive deeper into these topics.
Minimum Age: Can You Invest Under 18?
In most countries, if you are a minor, you cannot invest on your own. According to the law, you are not yet legally competent, so your signature is still worth nothing.
This doesn’t mean that you can’t be involved in investing when you’re a minor. If your parent or guardian gives you permission, you can invest together on their account. You can also gain knowledge and save money in advance so that you can start investing when you are old enough.
In this article, we’ll discuss how you can invest when you’re young and why it can be so interesting.
Invest at a young age: Why You Should Invest Especially as a Twentysomething
It’s wise to start investing when you’re young. Many young people avoid investing because it has a rather stuffy image. However, I want to wake you up: when you’re young, you have a lot of time, which increases the chance of a good result.
Investing can be attractive in any case: due to inflation, you can buy less and less with the amount in your account. By investing wisely, you can certainly achieve a positive return in the long term.
This return does need time to grow. When you start young, you have much more time. For example, if you invest $500 monthly at an average return of 8% from age 20 to 60, you end up with $1,745,000!
If you start much later, for example, at age 30, you have 10 years less. When you invest at 8% from age 30 to 60, you end up with $745,000. Starting young thus increases the chance of a high return.
Do you want to see for yourself what return you can achieve as a young investor? On this page, you can fill in how much you want to invest and for how long. You’ll immediately see what return you could achieve.
How Can You Invest When You’re Young?
You can invest with an online broker. An online broker is a party that allows you to trade stocks and other securities. You can invest in stocks with one of these brokers:
| Brokers | Benefits | Register |
|---|---|---|
 | Buy without commissions. Your capital is at risk. Other fees may apply. | |
 | Speculate with CFD's on increasing & decreasing prices of ! 80% of retail CFD accounts lose money. | |
 | Benefit from low fees, an innovative platform & high security! | |
 | Speculate on price increases and decreases of with a free demo! |
Create a Plan
Many young people start investing in a haphazard way: this is unwise. Take some time to sit down and create a plan. For example, how much money do you want to invest, and what risks are you willing to take?
It’s wise to set clear goals. You can do this through the SMART principle:
- Specific: Use specific numbers.
- Measurable: Make your goals measurable so you can track progress.
- Acceptable: Set reasonable and achievable goals.
- Realistic: Your goals should align with the intended outcome.
- Timely: Determine within what time frame your goal should be achieved.
An example of a plan: I have $100 available monthly to invest. I will deposit $90 into an ETF that tracks the market and will not touch it until I am 65 and ready to retire. I will use the remaining $10 to actively trade cryptocurrencies for fun. My goal is to achieve an average annual return of 6%.
Next, you can determine which type of investment is best suited for your plan.
What can you invest in when you’re young?
Not every investment is suitable for everyone. That’s why we start this article with an overview of the different investment opportunities that exist for young people. This way, you’ll immediately know what options are available.
1. Invest in stocks
When you’re young, you can invest in stocks. Many young people are deterred by the high transaction costs charged by many brokers. When you’re investing a small amount, it may seem impossible to achieve a good return. But nothing could be further from the truth!
There are brokers nowadays that allow you to buy shares commission-free. This means that you can buy a single stock and still achieve a positive return. Some brokers even allow you to buy so-called fractional shares. A fractional share is a portion of a share, which makes it possible to invest in a company with a small amount of money.
Are you interested in how stock investing works? Read this article!
2. Investing in a fund or ETF
Don’t feel like selecting individual stocks? Then it may be interesting to invest in an ETF. An ETF is an investment product that automatically invests your money in a selection of shares. This can be, for example, all the stocks included in the S&P 500.
Investing in ETFs may not be very exciting, but it’s a good way to steadily build equity. Want to read more about investing in ETFs? Consider reasing our ETF special!
3. Speculate in crypto
Cryptocurrencies are very popular among young people. This is not surprising since you can make a high profit in a short period of time by buying the right crypto. However, don’t forget that return and risk are always linked. Many young people ultimately lose money investing in crypto.
One advantage of being young is that you can afford to actively speculate with a small amount of money. Want to speculate in crypto too? Click here to read how to get started.
4. Paying off your debts
This investment is actually a no-brainer. Yet there are enough Millennials who decide to invest while they still have a credit card debt. This is a huge waste since you’ll end up paying more than ten percent interest on a comparable debt.
Remember that you should only invest money that you can afford to lose. When you have debts, you actually cannot afford to lose money. First, pay off your debts before embarking on an investment adventure.
5. Buying a House
Buying a house is also a smart investment when you are young. Unfortunately, this is not always easy: house prices have risen sharply, and as a starter, you often need help.
When you buy a house, you actually save a lot of money: if you rent a house, that money disappears. By buying a house, you put the money into your own home, and when you sell the house, you get the money back. Moreover, the costs of a mortgage are almost always lower than rental costs. However, keep in mind that house prices may fall in the future.
Do you want to become financially free by investing?
Everyone has a different goal when they start investing. A beautiful goal is to achieve financial freedom. This is a realistic goal, especially when you are young: you have much more time than someone who is already thirty, forty, or fifty. But how can you actually become financially free when you start investing?
Step 1: Make sure you have money left
An important first step is to make sure you have money left. Therefore, do not waste money on unnecessary luxuries and see how you can save a small amount left at the end of the month. Even an amount of 100 or 200 dollars can make a difference in the beginning. When you invest such a small amount monthly, you can build up a large fortune in the long term through compiunding.
Step 2: Look at how you can earn more
However, I would not advise young people to cut back on everything: you also want to live a little, don’t you? Besides, you can only cut back to a limited extent: you still need to eat & live somewhere.
In theory, however, your income can increase unlimitedly. It is therefore certainly worthwhile to think about how you can build up a higher income. For example, I started my own business at a young age and used this money to invest.
Step 3: Gather knowledge
They say that knowledge is power. In a sense, this is also true in investing. If you have no idea what you are doing, the chance of achieving a solid result is limited.
For example, if you want to build up a large fortune in the long term, the book value investing by Graham and Buffett is a good option. In any case, make sure you have realistic expectations: this increases the chance of success.
Step 4: Open an investment account
Ultimately, knowledge on its own is worth little. It is mainly applied knowledge that gives you real power. Therefore, it is certainly not unwise to open an investment account at a young age. Want to know what good parties are to invest
It is important to continue to control your emotions. Don’t suddenly go crazy buying random stocks. Remain composed and work slowly towards that beautiful goal: financial independence.
And remember: investing is risky, you can lose money!
Why do young people often make mistakes?
Unfortunately, not all young people are successful with investing. In this part of the article, we examine the mistakes that young investors often make. By taking these into account, you can prevent yourself from making these kinds of mistakes and achieve better results.
Reason 1: Procrastination
Millennials are kings of procrastination, which is a shame. Don’t just daydream about a rich and independent future. Take that first step today and start practicing! Over the long term, the stock markets have only risen. The power of compound interest is enormous: if you start at 25th, you only need to invest half of someone who is 35 years old to become a millionaire at 60th.
Theefore, don’t wait any longer and buy your first stock today!
Reason 2: It’s not a casino
Some young people confuse the stock market with the casino. Don’t use excessively high leverage and don’t speculate on random, risky stocks. The smart investor thinks carefully about each purchase. If it’s not clear why you should buy a certain stock, then don’t do it!
Reason 3: Don’t be afraid to ask questions
When you’re young, you can sometimes react more impulsively. This is fun for parties, but not so fun for your finances. Therefore, remain critical of your own investment behavior and ask a lot of questions.
Don’t blindly follow the trend and consider whether what you’re doing is still sensible. This way, you can prevent yourself from losing all your saved money at once because you wanted to have Bitcoins like all the other cool people.
Reason 4: Not investing
The biggest mistake you can make is not investing at all. If you don’t invest, you’ll never become financially independent. If you can afford to invest, then I definitely recommend it. It doesn’t have to be complicated: if you don’t want to spend time on it, you can simply buy a stake in an index fund.
Tips for young investors
If you start investing at a young age, you have a better chance of success later on. However, many young people have grown up with the credit crisis and see the stock market as a risky place to avoid. However, the highest returns are still achieved on the stock market in the long run.
But what distinguishes rich, successful young investors from the masses? With these tips, you can become a well prepared young investor!
Tip 1: Save money
It’s important to save money. Young people who are financially successful understand that they need a positive number in the end.
By saving money each month, you build up wealth that you can eventually invest with a positive result!
Tip 2: Get rid of those debts!
Many young people have debts. It is therefore wise to pay them off as soon as possible. The interest rates on debts are generally higher than the returns on investments. Paying off debt can, therefore, be the best investment!
Tip 3: Increase your income
Reducing your debts and having money left over already makes a positive difference. However, when you are young, you should also strive for extra income. You can choose to take a part-time job. This is wise, but entrepreneurship can be much more profitable, and when you are young, you have all the time to build something great.
Tip 4: Study
Most young people continue their education. It is not strange that young people go to university. But why are there so few young people who independently study their finances?
Read good books on investing and finance regularly so that you get a better overview of what works and what doesn’t. Some interesting books are, for example:
- Rich dad, poor dad by Robert Kiyosaki
- Trading in the Zone by Mark Douglas
- The way of the turtle by Curtis M. Faith
You can also find a lot of information on this website:
- Read here how stock prices are influenced
- Discover how technical analysis works
- Read here how to apply fundamental analysis
- See here how to read candlesticks
Tip 5: Practice!
When you are young and want to make profits through investing, you will need to practice! The best way to do this is by opening a demo account with an online broker. With a demo, you can actively trade on the markets without risking your own money. Click here to see where you can invest for free through a demo.
Tip 6: Control your emotions
The biggest challenge for investors is controlling their emotions. Emotions such as fear and greed have a significant impact on the quality of your investments. It is therefore wise to practice this even when you are young. In the article on the influence of emotions in investing, we delve deeper into how emotions can affect your results. Read this article carefully, it is one of the most important things you need to train if you want to become a good investor.
Think about your retirement
When you are young, you may not want to think about your retirement yet. However, it is wise to do so. With the aging population, there is a good chance that you will have to make do with a meager amount when you turn 67.
By setting aside a monthly amount and investing it, even small monthly investments can help you build a good fortune. You are never too young to think about your retirement!
Frequently Asked Questions
You generally need to be of legal age to invest on your own. If you are younger, you cannot open an invest account by yourself. In that case, you can of course look over your parents’ shoulders. Maybe they can help you and teach you more about how investing works. That way you will be fully prepared when you become an adult!
If your parents do not agree to open an account with a broker, you can still invest. Many banks have a special account that closely tracks the movements of the S&p500 and to some extent determines the interest you receive on your savings account. However, don’t forget that investing always involves risks; only start investing if you can sleep well despite the risk of losing money.
Regardless of your age, the same risks apply to investments. In practice, we see that young people often take more risks: for example, they do not apply risk diversification and only invest in crypto. Keep in mind that you can lose money with risky investments. However, when you are young, time is an advantage: you can keep investments open for a long time, so you can wait for improvements during a crisis.
Auteur
Over Alex Mostert
When I was 16, I secretly bought my first stock. Since that ‘proud moment’ I have been managing trading.info for over 10 years. It is my goal to educate people about financial freedom. After my studies business administration and psychology, I decided to put all my time in developing this website. Since I love to travel, I work from all over the world. Click here to read more about trading.info! Don’t hesitate to leave a comment under this article.
