Good habits begin at an early age. And there’s arguably no better habit to develop than good financial ones. We’ve discussed at length in this space the importance of a good credit score, how to responsibly manage debt, growing wealth, why you need an emergency savings account and more. Unfortunately, these are lessons that often are learned the hard way by adults.
But what if kids could get an early tutorial into the world of investing? Thanks to a new tool from Fidelity Investments, it’s already happening. When it comes to investing, you can never start too early. And Fidelity’s new Youth Account is designed to give teenagers ages 13 through 17 access to the stock market. Launched on May 18, the portal will permit teenagers to purchase and sell a variety of U.S.-based stocks, EFTs and mutual funds. There are no fees, commissions or minimum requirements. The only stipulation is that the child’s parent or guardian is OK with it, as parental consent is required.
One key point of advice for any young professional just entering the workforce is to begin saving toward a retirement fund immediately. Ideally, they’ll contribute at least as much as an employer-sponsored account is willing to match to begin their journey toward retirement. But it goes without saying that the earlier you can start investing, the better.
If you’re able to start investing at 13 rather than 23, that’s a lot more money you’re likely to have in the market in the long term. And considering that money that’s in the market will continue to grow based on returns, kids could very well be setting themselves up nicely with Fidelity’s Youth Account.
In fact, according to data compiled by CNBC, an individual who begins investing at 13 compared to starting at 23 could have nearly double the investment earnings by the retirement age of 67, assuming a conservative 7 percent return rate and based on an initial investment of $100 and adding $100 per month. (For reference, the average return rate is 10 percent per year.) Furthermore, a 13-year-old that begins investing would hit the $1 million mark when they turn 74 on this — and this investment — alone. For the individual that begins investing at 23, it would take them an additional decade to reach the $1 million mark.
Like we said, the longer your money is in the market, the more opportunity it will have to take advantage of returns. And while there is risk in the money market, it’s important to keep in mind that it’s a marathon, not a race. Fidelity’s new Youth Account program could become a great tool for teaching kids about investing and setting themselves up for success in the long term.