How I got my teenager investing at 13

Trying to give my kids a head start with investing

Photo by Annie Spratt on Unsplash

Introduction

Getting a head start on investing can be an invaluable life decision.

If a teenager were to start investing in a Roth IRA when they’re 15 and contribute the maximum amount each year ($6,500 as of 2023), and assuming the maximum contribution stays the same, the account could grow to more than $3 million after 50 years, assuming an average 7% annual return. If a 25-year-old did the same, that account would grow to less than $1.5 million, for a 35-year-old it would be around $700,000, etc.

Because time is of the essence, I wanted to teach my kids how to invest in the market as early as possible. Below is how I went about it.

As always, this is a quick reminder that this is not financial advice, just myself sharing my investments, stocks, index fund strategies, what I'm buying, and where I plan to take those investments.

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Getting my kids into the market

When our daughters were born, the first thing we did for each of them was to open a 529 account. I’ll discuss 529 accounts in a future newsletter, but they are essentially college savings plans sponsored by a state or state agency. Money in those accounts can be used tax-free for many types of schooling. We contributed to those accounts automatically each month, and once we were comfortable with how much we had in them, we opened UTMA custodial accounts, which are taxable investment accounts that are controlled by a parent or relative until the children turn the age of majority (which is 21 in Colorado).

Up until that point, we had been doing all of the investing for our kids. However, I wanted to have our children invest for themselves.

When my oldest daughter turned 13 years old, I opened a Fidelity Youth account. It’s a great account that has no fees, includes a debit card for the child (that earns 5¢ back per use) and it allows kids to invest in stocks and mutual funds.

Investing

When we opened the account, we agreed to pay our oldest daughter $100 / month. Of that, she keeps $50, and she has to invest the other $50 into the Fidelity S&P 500 index fund (FXAIX). I wouldn’t allow an automatic investment so she has to manually go in each month and invest. She set up a calendar reminder each month and hasn’t missed a month yet.

So far, it’s worked out great. She started in January and her FXAIX is up over 6% so far (and that’s with the market being down so far this month). She recently started a job and told me she’s going to start investing $100 / month instead of $50. I was so proud.

You can learn more about Fidelity Youth accounts on their website here. Currently, Fidelity is offering $50 in the kids’ account to get started once the account is opened and the app is downloaded.

The Fidelity Youth account is for teens ages 13-17. Our youngest daughter is currently 12 years old, but we will be doing the same deal for her as soon as she turns 13. She currently has a CHASE First Banking account, which is designed for kids 6-12, and provides kids with a debit card and allows parents to choose where and how much their kid can spend in stores and online, create kids allowances, and assign chores. However, you cannot buy stocks or ETFs with this account, which is why I’m planning to switch over to a Fidelity Youth account when she turns 13.

Other alternatives

We currently use the Fidelity Youth Account and CHASE First Banking account, however, there are plenty of other options, including Greenlight and Stockpile, which have a lot of the same features as the Fidelity Youth account. However, there is a monthly fee for both of those accounts.

Conclusion

Have you started getting your kids into investing? If so, what strategies did you use? Please let me know in the Comments. Also, please give this newsletter a “Like” as it helps with the Substack algorithm.

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