Getting 16 yr old started in investing

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55andout
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Getting 16 yr old started in investing

Post by 55andout »

I have a 16 yr old niece, and would like to find a way to encourage her to get interested in investing. I'm sure she, and probably more her friends, would consider this a very "uncool" area of interest for someone her age, but I don't care. I was thinking about starting a fund at Vanguard for her, and perhaps matching future contributions in some percentage, based on what she adds to the fund. She currently does not have a job, but is a straight A student, and involved in more school clubs and activities than I can list.

I'm wondering if there is a way to open a Vanguard index fund in this type of situation for less than $3000? Also wondering what the best books or videos are that would be age appropriate. Any other suggestions or ideas are encouraged. I suspect others have already addressed this issue, so hoping I can learn from the best.

Thanks in advance.
sscritic
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Re: Getting 16 yr old started in investing

Post by sscritic »

55andout wrote: I'm sure she, and probably more her friends, would consider this a very "uncool" area of interest for someone her age, but I don't care.
...
I suspect others have already addressed this issue, so hoping I can learn from the best.
On the other hand, you might hear from the worst. I mean, who forces people to do things they don't want to do? But then, you have already classified yourself as someone who doesn't care.

Good luck!
dgoldstein
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Re: Getting 16 yr old started in investing

Post by dgoldstein »

Force feeding a young person seldom leads to them digesting it and wanting more. They have to want it unless you're going to do all the work for them and then turn it over to them when they are ready - could be a few years from now or 20 years from now.

Trying to discuss the financial topic with young kids can be difficult, but small spurts, simple terms and putting investing at a young age in perspective is a good idea. Young people typically have no grasp of the ramifications of NOT saving money for when, or in some cases, if they life a long life. For a 16 year old, turning 25, 30 or certainly 60 years old is so far off, it's barely even comprehensible or relevant. They're usually living in the moment.

Knowing you kid and how to communicate with them, or figuring it out so you're not a nagging PITA would be the best way to get them on track. Maybe they won't jump in at 16, but maybe 18 if you try to have conversations on a semi-regular basis.

Young kids these days have a [(removed) --admin LadyGeek] ton of stuff to deal with. More so than any Gen-X'er or older has ever dealt with. They have cyber bullying, a diluted job market, sky rocketing college debt to face, political ramifications, and all kinds of other aspects that weren't as prevalent or just didn't exist 10-20+ years ago.

Good luck!
sunnyday
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Re: Getting 16 yr old started in investing

Post by sunnyday »

55andout wrote:I have a 16 yr old niece, and would like to find a way to encourage her to get interested in investing. I'm sure she, and probably more her friends, would consider this a very "uncool" area of interest for someone her age, but I don't care.
Considering she doesn't have a job, probably no savings, and is only 16 she may think investing is pointless to worry about at this stage in her life and not "uncool". If you gave her a million dollars to invest I bet she would think its cool.
How do her parents feel about your idea?
barnaclebob
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Re: Getting 16 yr old started in investing

Post by barnaclebob »

The only thing i wish someone had told me before I got a job at 16 was to open a Roth IRA with low cost index funds.
snowman
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Re: Getting 16 yr old started in investing

Post by snowman »

We opened accounts for our kids at TD Ameritrade - no fees, no minimums, commission-free Vanguard ETFs. They were eager to get those accounts going and buy their own ETFs - VTI and VEU. They never thought it was not "cool", but than we are very much outside the norm, as are most BHs I suspect. They learned from observing their parents, so there really wasn't much to teach.

It's been a while, but I remember what caught their attention the most was the table in one of the books about Person A saving $x amount for 10 years and than nothing for the following 30 years, compared to Person B skipping first 10 years and than contributing the same amount for 30 years. It was a wow moment for both of them. I don't know if you can replicate that teaching moment, but I don't think a teenager is going to read one of the BH books. It's easy to teach your own kids, not sure how you can do it with your niece; maybe email her link to good article, not sure.

Just my thoughts. Good luck to both of you.
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InvestorNewb
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Re: Getting 16 yr old started in investing

Post by InvestorNewb »

sscritic wrote:On the other hand, you might hear from the worst. I mean, who forces people to do things they don't want to do? But then, you have already classified yourself as someone who doesn't care.

Good luck!
I think it's commendable that the OP is trying to get his niece on the right financial path. Even though a 16 y.o. could probably care less, it's worth trying.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
sscritic
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Re: Getting 16 yr old started in investing

Post by sscritic »

OP:

How many years have you been a parent?

Here is my suggestion. Give her the opportunity to become interested.

When my daughter was nine, I had a subscription to the WSJ, so it was left lying around the house. One day, my wife and I noticed my daughter reading it. No one told her to, she just liked reading and it was something else to read. I would sometimes ask her about what she was reading, and sometimes she would ask me about something she didn't quite understand.

So get your niece a subscription to the WSJ and never say a word about it. She will get interested if she wants to.
wolfeman
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Re: Getting 16 yr old started in investing

Post by wolfeman »

It would definitely help if she had some earned income so she could start a Roth IRA. Maybe just show her a compounding interest table and show her how much she could have the earlier she starts. If they aren't interested they aren't interested. I think a basic personal finance course should be offered in all high schools.
z06ray
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Re: Getting 16 yr old started in investing

Post by z06ray »

Don't know if this has been suggested, but isn't the minimum on target retirement funds, 1,000$ (may still be higher than you expect but 1/3 of $3,000)
island
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Re: Getting 16 yr old started in investing

Post by island »

Are her parents saving for her? I wouldn't think of starting an account and funding it for her without seeing what her parents think of that. It's like giving her an allowance she can blow if she wants to. Best path might be to encourage her to work, save and invest her own money. Nothing exotic, babysitting, a summer job perhaps, then open a Roth. Is she interested in doing anything like that? Although if investing is considered uncool, I'm sure work is too! :D
Last edited by island on Fri Nov 15, 2013 3:35 pm, edited 1 time in total.
Mingus
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Re: Getting 16 yr old started in investing

Post by Mingus »

Open her an account, with the parents knowledge.

Tell niece about it.

Contribute $500 or $1000/year to it, and match any contributions she makes (up to a certain amount...) until she is 25.

I doubt she would have any significant contributions until she is past the age of 25.

This would at the very minimum open the door to investing to her.

Or, on the other hand she cashes it out and uses the money for a down-payment on a leased BMW for $499/month for 36 months when she is 21.
Grt2bOutdoors
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Re: Getting 16 yr old started in investing

Post by Grt2bOutdoors »

Say nothing*. Open the account in your name - seed it with whatever amount you decide on. When she graduates school, write her a graduation card telling her you wanted to start her out on the right foot for her future. Give her The Little Book of Common Sense Investing and an envelope enclosed with the annual statements - there will be six or seven of them (16,17,18,19,20,21,22) and gift the shares to her - assuming the value of the account is below $14K - no gift tax, no tax unless she sells.

* - If she strays and doesn't continue with her stellar behavior, giving the account will just encourage more bad behavior.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Meg77
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Re: Getting 16 yr old started in investing

Post by Meg77 »

I think it is wonderful that you want to get your neice interested in investing! Don't underestimate her. Nobody at any age thinks money is "uncool." Any many kids and teens are eager to learn how to get and manage some of their own once they are given the opportunity. I suggest you get her a good book on investing basics - preferably one with shiny exciting compound interest charts which highlight the benefits of starting to save early. I also think it's a good idea to offer to match her investments to some degree. She is surely trying to save up for college, or a car, or a spring break trip or something. And she surely has access to some amounts of money (allowance, Christmas/birthday gifts, summer jobs or internships). If not she may just be motivated to start a part time business as a babysitter or lawnmower, or get some other job.

Don't open the account for her though. Make her handle all the details and execute the trades. Have her call up Vanguard if she doesn't understand something. And a Vanguard brokerage account may be a better idea at this stage since she can start with no minimums - and learn some important lessons in the process by dealing with stocks and ETFs directly.

My Story
When I was 13 years old I found a book on investing in the backseat of my grandfather's car (it was one of the Motley Fool "Fool's Guide to Investing" or some such title). I started reading it on our drive and he noticed and told me to keep it. I was mesmerized by the compounding interest charts. I was dazzled by the size of the numbers on the page and how quickly they increased with each passing year. The two columns offered examples of an investor who started at age 25 versus one who started at age 35. The difference, as I'm sure all of you know, was astounding. I searched and searched but couldn't find a chart that would show me how rich I could become if I started investing at 15. Based on my limited reasoning skills though, I was sure it would be even richer than the "early bird" 25 year old investor.

So, I announced to my father that I wanted to open an "online discount brokerage account," as the book suggested. I knew he'd been a stockbroker before I was born, so I expected him to tell me exactly what to do and what to invest in. I was disappointed when he simply responded, "ok, go ahead." He made me figure it all out and open the account by myself. He then took me to the bank to withdraw some of my savings (from Christmas gifts, etc) and drove me to the Scottrade office to deposit the check. He later did agree to match my savings at some point I think...over the years I learned various tough lessons on a relatively small amount of money. I learned that if you buy too few shares of a stock, the commission to trade can wipe out your gain. I learned that if you trade too much, you end up having to do a lot of work at tax time - and pay a lot of that money back that you thought you "made." And so on.

I'm forever grateful to my grandfather for fostering my interest in investing. As it grew, he gave me more books and took me along when he met with his financial advisor. I don't remember much of what was said back then, but I remember feeling important and accomplished and also I remember noticing how much he respected me and this topic. It made a huge difference in my life, I'm sure. I opened a Roth IRA when I got my first job at age 18 and have maxed it out every year since. I also encouraged all my sisters to do the same. The trickle down impact of that one book have been tremendous.
"An investment in knowledge pays the best interest." - Benjamin Franklin
daffodilspurple
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Re: Getting 16 yr old started in investing

Post by daffodilspurple »

What my parents did when I was young was to open an account and fund the minimum value (in my case $100) with their money. I was then told that if I could match their contribution within a year, that I could keep their original contribution, effectively doubling my money. It was good motivation and got me started saving early. There is no shame in starting small to pique her interest and moving on (or not) from there.

I believe that they opened a joint account to which I could, theoretically, have had access. So if you think that she's likely to use that money without permission, that may be a dealbreaker.
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Van-Guard23
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Re: Getting 16 yr old started in investing

Post by Van-Guard23 »

55andout wrote:I have a 16 yr old niece, and would like to find a way to encourage her to get interested in investing.
Yeah, good luck with that. I encouraged my stepdaughter to save...but it wasn't until she had earned income at age 18, and I helped her open and contribute to her own Roth IRA, did she learn to appreciate the value of saving and investing. And hearing her talk about how much she continues to live below her means and how much her investments and savings have grown in the last few years, makes me confident that she will achieve financial independence.
55andout wrote:Also wondering what the best books or videos are that would be age appropriate. Any other suggestions or ideas are encouraged.
I tried to get my stepdaughter to read "The Richest Man in Babylon", short read with timeless nuggets of financial advice, but I think her biggest motivation is seeing her net worth increase with time. I believe we've facilitated a foundation of healthy financial habits and will continue to build upon that with the able assistance provided by this forum.
"I have only come here seeking knowledge. Things they wouldn't teach me of in college" | The Police "Wrapped Around Your Finger"
Dandy
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Re: Getting 16 yr old started in investing

Post by Dandy »

Talk to her parents to see if they are ok with it and can give you an idea of how she will react. If you get a green light discuss it with your niece and if she warms to the idea you are a go. If you get less than a decent interest from your nice - tell her to think about it and if/when she is ready you are ready to help.
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BL
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Re: Getting 16 yr old started in investing

Post by BL »

I like the learning aspect of a $1,000 far-distant Vanguard Target Retirement date fund (mostly stocks) if her parents are OK with it. Having her do her own taxes, if required (or just to keep if not), is also a good learning experience. Maybe convert to a Roth if she has work income. It seems a shame but personal savings are sometimes discouraged because of the effect on college scholarships.
reggiesimpson
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Re: Getting 16 yr old started in investing

Post by reggiesimpson »

"You can lead a horse to water but you cant make them drink it".............ok so its an old adage and i will try to be a little more constructive. It may be more instructive if she gets a job and wastes the money on buying stuff and then you explain to her how fast the value of her stuff has dropped ( her loss in interest and value of her used junk). In essence she is wasting her job/time efforts. After you have explained this to her (in a "painful" way) she may be more open to your suggestions on how to become wealthy.
Just my .02 cents.
sscritic
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Re: Getting 16 yr old started in investing

Post by sscritic »

reggiesimpson wrote:"You can lead a horse to water but you cant make them drink it"...
I read relationship advice columns. The other old adage is that you can't change another person, you can only change how you yourself react and what you do. I like Meg77's story, but I interpret it a little differently than she does. She picked up a book and started reading. She found it fascinating. Other young girls would have reacted differently. Meg77's interest in investing came from within, as soon as she saw how money could grow. Another young girl could be fascinated by ballet, and not money. Another, architecture, not money.

We are each different. Some of us like to ask questions here, and some of us like to answer them. Some like details, and some don't. No one can make a co-worker or a niece take an interest in what they are not going to be interested in. You can only expose them to new ideas, and if the interest is there, it will manifest itself.
reggiesimpson
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Re: Getting 16 yr old started in investing

Post by reggiesimpson »

sscritic wrote:
reggiesimpson wrote:"You can lead a horse to water but you cant make them drink it"...
I read relationship advice columns. The other old adage is that you can't change another person, you can only change how you yourself react and what you do. I like Meg77's story, but I interpret it a little differently than she does. She picked up a book and started reading. She found it fascinating. Other young girls would have reacted differently. Meg77's interest in investing came from within, as soon as she saw how money could grow. Another young girl could be fascinated by ballet, and not money. Another, architecture, not money.

We are each different. Some of us like to ask questions here, and some of us like to answer them. Some like details, and some don't. No one can make a co-worker or a niece take an interest in what they are not going to be interested in. You can only expose them to new ideas, and if the interest is there, it will manifest itself.

Agreed.
If the person in question were a full adult i wouldnt have gone into the detail that i did. However,I have had the same issues regarding my own children. The OP is trying to guide a young and impressionable relative and i think that its commendable.
tibbitts
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Re: Getting 16 yr old started in investing

Post by tibbitts »

55andout wrote:I have a 16 yr old niece, and would like to find a way to encourage her to get interested in investing. I'm sure she, and probably more her friends, would consider this a very "uncool" area of interest for someone her age, but I don't care. I was thinking about starting a fund at Vanguard for her, and perhaps matching future contributions in some percentage, based on what she adds to the fund. She currently does not have a job, but is a straight A student, and involved in more school clubs and activities than I can list.

I'm wondering if there is a way to open a Vanguard index fund in this type of situation for less than $3000? Also wondering what the best books or videos are that would be age appropriate. Any other suggestions or ideas are encouraged. I suspect others have already addressed this issue, so hoping I can learn from the best.

Thanks in advance.
It's good to expose someone that age to various experiences, including investing. But part of the problem with trying to get someone interested in boglehead investing is that it's simple - there isn't really a lot of knowledge to transfer, if you ignore the hobby aspect (tilting, etc.) and concentrate on what people really need to know. So I'm not usre you can teach anything by putting $1k (minimum for many VG funds, although possibly not your favorites.) What does she do with it? Sit there and watch it? And don't forget to consider what you'll be teaching her if she sees that balance drop - year, after year, after year. First impressions count. My parents invested an amount for me in equities in the mid/late 1960s - by the time I knew what was going on (mid-1970s), that wasn't exactly an incentive to invest.

Overall I'm not convinced that investing is the highest priority skill you should be emphasizing in detail at that age; not to the same degree as other life skills that she needs to learn. What other interests have you considered sharing with her?
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