Investing advice is all over social media so it’s hardly surprising that young adults are keen to get started. And while it’s dangerous to let teenagers fall for get-rich stock buying tips from the internet, teaching them some basics while under your supervision can help turn them into successful long-term investors.
According to a recent report from the Conference Board of Canada, 53 per cent of Canadian investors use social media for investment information and for young people between the ages of 18 and 24, that number rises to 82 per cent.
Teenagers under 18 are, of course, also seeing this content. And if they show an interest, parents should encourage them. Investing is a life skill and learning to do it properly, especially at a young age, means they can take full advantage of the power of time and compounding to grow their savings for goals like paying for school, buying a home, traveling, starting a business or, eventually, retiring.
Teens under the age of 18 can’t open their own account, but a parent can open one in their own name and use it as a “teaching account” for their child. I opened a WealthSimple investing account for my son when he turned 16. I added $500 and chose three exchange-traded funds (ETFs), explaining that this approach is safer than choosing individual stocks. I gave him a brief lesson on what ETFs are, why we own the ones we do, and I had him place a trade, which allowed him to see how the process works and left him feeling excited and empowered.
Working with your teenager in this way gets them started with guardrails in place, so that once they have their own account, they will have a basic understanding of what they are doing. It makes investing less scary and with a small amount of money in the account, allows them to potentially make mistakes when the stakes are low.
Young people over the age of 18 or 19 – depending on the province – can open their own investment account with an online broker. As a parent, you have no say in what they do with the money in the account but you can still offer guidance. Even if you have limited investing knowledge, you can help them learn to invest in a safe and smart way.
One way to help is to find a family member or friend who is willing to teach them. If you know someone who has investing experience, especially a long-time do-it-yourself investor, ask them to sit down with your teenager and go over the basics.
This person should help them understand the concepts of asset allocation and diversification, as well as how to avoid getting caught up in risky investments such as individual stocks and cryptocurrency. I have done this with several teenagers in my life and it’s incredibly rewarding and fun.
Gift them an online course. There are lots of online courses that teach the basics of investing. Some are free, but to really get good value, you’re going to have to pay. The good news is that there are plenty of affordable options. Look for a course that explains fundamentals like asset allocation and diversification while focusing on taking a passive investment approach using ETFs.
Make sure the person who is offering the course has credibility. Some things to look for include whether they have financial industry credentials such as the Chartered Financial Analyst (CFA) or Certified Financial Planner (CFP) designations, and whether they have published a blog or book about investing.
Hire a financial professional to teach them. Some professionals like financial coaches and financial planners will offer their time on an hourly basis to explain the basics of financial planning and investing. Ask the person to lay the foundation for investing in a safe and responsible manner. You might want to join the meeting yourself to improve your own investing literacy and to see what your child is learning.
Direct them to some reputable sources of financial information on social media. It can be hard to discern the good from the bad but there are some telltale signs that a finfluencer should be ignored. If they recommend specific investments, make promises of big gains or brag about quick wins, tune them out.
Giving information – not advice – about investing is what you want. Teenagers are social-media savvy and they know to look out for things that are too good to be true, but it’s still important to nudge your child to question what they are seeing.
Investing is a crucial part of financial stability and success. Encourage your kids to get started early and be smart about it. The payoff is huge.
Anita Bruinsma is a Toronto-based financial coach and a parent of two teenage boys. You can find her at Clarity Personal Finance.