How to Help Your High Schooler Start Investing

It often takes adults many years to get on the board with the idea of investing their money. So if you have a high-school teen who's yet to start investing, they're probably in good company.

But the sooner your child begins to invest, the more wealth they have an opportunity to build. So with that in mind, here are a few steps you can take to help your high schooler kick off their investing career.

1. Encourage them to get a job

You don't need a lot of money to start investing, but you do need some. So unless you want to be the one handing over that cash, encourage your teen to go out and get a job. It can be something very part time, like tutoring a fellow student once a week. Or if your high schooler can handle a steady gig, like weekend hours at a local shop, even better.

2. Open a brokerage account for them

You generally need to be 18 years of age to open your own brokerage account. But you can open up a custodial account on your child's behalf where they can invest their money. In this case, the assets belong to your child, not you. And that's a good thing, because if your child's investments make money, you won't be liable for capital gains taxes -- your child will. And your child most likely has a lower tax rate than you do.

3. Show them how to choose stocks

You don't want your child picking stocks at random for their portfolio. So you may need to be prepared to show them the ropes. Encourage your child to look at different companies' financials when making their choice. And also, help them navigate their options by explaining the importance of diversification.

Now to be fair, when your child is first starting out, they may only be buying one or two stocks. So it's not so terrible if their portfolio isn't all that diverse from the very start. Remember, you want to make the process of investing fun for your teen so they're motivated to keep doing it. So if they decide to buy shares of McDonald's and Chipotle stock because those are your teen's two favorite food places, so be it.

Of course, this raises the question: What if you don't really know anything about investing, and you therefore don't have much advice to give to your teen? In that case, a good bet may be to encourage your teen to choose some individual stocks, but also, buy shares of some S&P 500 ETFs so they're effectively investing in the broad market.

Get started early

Many high schoolers are more focused on social media and after-school plans than investing. But if you get your teen started at a young age, they might manage to grow a lot of wealth over time.

Over the past 50 years, the stock market's average annual return, as measured by the S&P 500, is 10% before inflation. If your child invests $2,000 at age 17 and their portfolio enjoys that same return, in 50 years, that $2,000 will be worth about $235,000. So if your teen isn't too thrilled about getting a job and then investing their money rather than spending it, you may want to put that sacrifice in perspective by showing them how much wealth they stand to gain over time if they start young.