Juliana N., an 18-year-old, newly minted high school graduate from Naples, Florida, began her money management education early in life.
She was named the 2025 Charles Schwab Money Matters Ambassador by the Boys & Girls Clubs of America and is preparing to start college at Columbia University, where she’ll major in financial engineering.
Juliana credits the Money Matters program for giving her a head start on financial skills such as budgeting and investing.
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Turning 18 this year means she can open retirement accounts like a 401(k) or a Roth individual retirement account with earned income. One thing she learned about was the 50-30-20 rule for allocating money.
“It’s suggested that 50% of your income goes toward needs, 30% goes into internal wants and 20% goes into saving,” Juliana says. “This is a way for you to portion out how much you bring in weekly or biweekly. You can adjust it depending on your needs.”
Here are some more tips and resources for getting your teen interested in investing at an early age, or if you are a teen, reasons why you might want to prioritize getting a head start on retirement savings:
— Not too early for retirement accounts.
— Start small, but get started.
— Start with familiar company brands.
— Take creative approaches to investing.
Not Too Early for Retirement Accounts
Mike Schultz, a wealth manager, research analyst and financial planner at Badgley Phelps Wealth Managers in Seattle, notes that teens younger than 18 can take advantage of tax-free compounding by having their parents open a custodial Roth IRA in their name.
As long as minors have reportable earned income in the form of taxable earnings or wages, they can contribute up to their yearly income or the annual contribution limit of $7,000 for 2025, whichever is lower, in this tax-advantaged account.
“The account will always be owned by the minor, but it will be controlled by the designated adult until the minor reaches adulthood,” Schultz explains.
He adds that Roth IRAs have significant flexibility, including tax- and penalty-free withdrawals that can be made after reaching age 59½.
“However, you can withdraw contributions at any time with no penalty or tax owed since they were made with after-tax money,” he says. “In addition, many investment companies offer Roth IRA accounts with no minimum investment and no commission on trades.”
Over the course of 40 years, an initial investment earning just 3% per year will more than triple in value, Schultz says. “At 6% per year, it will be worth more than 10 times the initial investment over that same time period,” he adds.
Start Small, But Get Started
Putting away even a small amount each month gives teens a good start, Juliana says. “I know that there were a few students at my school who couldn’t put in a lot, but they’re just trying to put in $20 or $30 each month, just a section of their paycheck, because we need to start understanding what compound interest is,” she says.
That $20 or $30 can go a long way over time.
“People are intimidated that they can only put $5, when maxing out is at $7,000, but just even a dollar can just compound, so just see what you can do, to the best of your ability,” Juliana says.
Start With Familiar Company Brands
Teen investors often need different motivation than adults who have retirement in their sights.
For example, within an IRA, teens can use individual stocks to learn about investing and markets. That’s a different approach than most older investors should take, as too much single-stock risk can cause serious damage to a retirement nest egg.
“If you’re thinking about investing, researching the brands you love and use every day can be a great place to start,” says Victor Wang, CEO of San Francisco-based Stockpile, an app aimed at helping children and teens learn to save and invest.
“Maybe you’re a huge Nike fan or live by your favorite Spotify playlists. You can start investing just $5 in a few of your favorite companies and go from there,” Wang says.
Wang still advocates for diversification, however. “For example, maybe you invest in a few stocks in tech, health care and entertainment. That way, if tech stocks aren’t doing so hot, the stocks in the other industries might be, helping your portfolio stay balanced,” Wang says.
Investing in a broad index like the S&P 500, which tracks large companies familiar to many Americans, can be done through an exchange-traded fund like the Vanguard S&P 500 ETF (ticker: VOO). “This can help you get exposure to a bunch of different companies at once,” Wang says.
Take Creative Approaches to Investing
Today’s teen investors can benefit from trading without fees, and from fractional shares. These features, available at many brokerages, remove traditional barriers to entry, making it easier than ever for teens to get started.
“It can be relatively easy to pair one or more diversified index ETFs with several individually selected stocks and still have a portfolio to manage that doesn’t take undue risk for an individual with a very long investment time horizon,” Schultz says.
Families can use other creative ideas to get the investment ball rolling.
“A teen can start by creating a portfolio on paper and tracking it with no risk before purchasing any shares,” Schultz says. “This could even be turned into a stock-picking competition between family members, with the winner getting the initial investment money to fund their account.”
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Investing for Teens: How to Invest Money as a Teenager originally appeared on usnews.com
Update 06/16/25: This story was previously published at an earlier date and has been updated with new information.
