21 Reasons Why Teenagers Should Invest Now
Research shows that teenagers in England and Ireland rank among the lowest in the world for financial literacy. As such, very few young people manage money properly and even fewer actively invest to grow their spare cash.
In case you think investing is a waste of time or just something that adults do, here’s a list of 21 reasons why teenagers (or anyone else) should start investing ASAP.
1. Money loses value over time
£100 will buy you more today than it will in 20 years time (unless you invest of course). That’s inflation for you.
2. Inflation is rising
We’ve had years of very low inflation but things are changing. Inflation is now at around 3%, meaning that your spare cash loses 3% of value each year.
3. Property prices are very, very high
I know it, you know it. Property prices are sky high. And although they’re falling in some places, they’re unlikely to collapse any time soon.
Either way, you’ll need to have cash for a deposit if you want to avoid renting forever.
4. Investing doesn’t have to be super risky
No risk, no reward goes the saying.
However, investing doesn’t need to be insanely risky for it to pay off. ETFs and index funds mean that you can sit back and have your money simply track the stock market’s movements with minimal risk.
5. The only way is up (in the long run)
The stock market will go up and down many times in our lives. However, over the long-term, the only way is up. As the world gets bigger and new money enters the financial system, stock prices get pushed up over time.
Don’t believe me? Then look at a chart of the S&P 500 over the last 100 years.
6. There’s a tonne of financial technology out there to help you
If you think that saving and investing is a hassle then luckily there is a tonne of technology out there to help you. Check out Monzo, Revolut and Chip if you want to find out more.
7. The tax benefits of an ISA
If you put your money into an Individual Savings Account (an ISA), you will not be taxed on the profits you make on your investments (up to a limit). Over time, this really adds up.
8. Good habits last
The average UK household has £8,000 of debt. In other words, they have no savings and owe banks money. If you start investing early on, you’ll likely avoid picking up bad habits later on.
9. Reach goals quicker
Investing should be for the long term but putting your money to work will help you reach your goals faster than the 0.5% interest paid out by banks.
If your £1,000 investment grows by 10% in a year, you have £1,100. If it grows by another 10%, you’ll have £1,210, thanks to compounding. Over time, this really adds up.
11. Startup capital
Studies show that today’s teenagers are the most inclined to start their own businesses.
However, banks don’t lend easily, so without some cash at hand you’re going to struggle. Having a stash of money in safe investments will help you turn an idea into reality.
12. Grow your money by doing nothing
People love the idea of passive income. The reality is that very few things are truly passive, including investment. However, investing in passive index funds is probably the closest you can get.
13. Earn money for doing nothing
Companies don’t just keep all the profits they make - they give them to shareholders via dividends. Not all dividends are equal and some companies pay out more than others.
14. There are no barriers to entry
Unlike jobs, there are very few barriers to entry in the stock market. You can open account with a broker today and start growing your wealth right away.
15. Develop self-control
At some point, your investments will crash and seeing the value of your holdings go down will be a shock. However, by remaining calm and not selling at a terrible time, you’ll develop great self-control that will apply to other areas of your life.
16. Understand how the world works
Like it or not, it's a capitalist world.
Learning how to invest in stocks, bonds or property will give you a greater understanding of how money flows through the system.
17. You have a long investment horizon
As I said earlier, your investments will go down at some point. Fortunately, the younger you are, the longer you have to ride out any difficult periods in the market.
This effectively means you can take on more risk than someone older than you with the same financial means.
18. You don’t need to be a financial genius to do it
Investing isn’t always easy but it isn’t complicated either. You’ll need to learn to develop self-control and patience but these things don’t require immense brainpower.
With the range of passive funds available today, you can sit back and let the markets do their thing.
19. Sound investments pay off
Investing in good companies or passive funds over the long-term will pay off (literally).
Had you invested £1,000 in Amazon 20 years ago, you’d be a millionaire today. Apple stocks were $4.95 each in 2000 - they’re $180 apiece now.
Enough said really.
20. You don’t have to rely on a crappy pension
People are living longer but aren’t saving nearly enough. If you fail to invest enough or don’t put enough towards your pension, you risk having a miserable retirement.
Start growing your wealth today and you can avoid this.
21. The earlier you start, the quicker it will pay off
I mentioned compounding earlier, but it’s worth a second mention. Warren Buffett, the world’s greatest investor, made 99% of his money after the age of 50. Compounding takes time but the sooner you start, the quicker you’ll get to your destination.
So, what do you reckon - is investing worth your time?