Your teens summer earnings can’t buy love, but they can buy a bit of retirement security. In my last column, I extolled the virtues of opening—and perhaps even contributing to—a Roth IRA for a working teenager. Your child needs to earn money if he or how To Invest Money As A Teenager are going to contribute to an IRA on his behalf. The deadline for making the contribution is April 15, 2015. But you can start sooner, even if your teen hasn’t yet earned the money on which you will be basing the IRA contribution.
If the kid doesn’t earn enough to justify your contributions, you can withdraw the excess with relatively little in the way of paperwork or penalties. Roth IRA on her behalf, using her Social Security number. Not every brokerage or mutual fund company that will open a Roth IRA for an adult will do so for a minor, but many of the larger ones will, including Vanguard, Schwab, and TD Ameritrade. Once she ages out, the account will then need to be re-registered in her name. To encourage your teen to participate, you might offer to match every dollar he puts in. How an adult should invest an IRA depends upon the person’s goals and risk tolerance—the same is true for a teen. You can help set those parameters by pointing out to your child that, since he’s unlikely to retire until his 60s this is likely to be a decades-long investment, and enduring short-term downturns is the price for enjoying higher potential long-term gains. Ask your child: Which would you rather?
No doubt, your kid will choose the bigger number. But you also want this to be a lesson in the risks involved in investing. Some teenagers will be perfectly fine accepting the risk. You also might explain that there are options that will not decline in value at all—such as CDs and money market accounts. But should he choose those safer options, he’ll be trading off high reward for that benefit of low risk. So his money will actually be worth less by the time he’s ready to retire. Some risk, therefore, will likely be necessary in order to grow his money in a meaningful way.
Assuming he can tolerate some fluctuation, a stock-based mutual fund is probably the most appropriate and profitable strategy—especially since a fund can theoretically offer him a ownership in hundreds of different securities even though he may only be investing a few thousand dollars. These offerings are geared toward a specific year in the future—for instance, one near the time at which your child might retire. Target date funds are usually a portfolio comprised of several different funds. The portfolio allocation starts out fairly aggressive, with a majority of the money invested in stock-based funds, and much smaller portion in bond funds or money market accounts. As time goes by—and your child’s prospective retirement draws nearer—the allocation of the overall fund gradually becomes more conservative. The value of the account can still rise and fall in the years nearing retirement, but with likely less volatility than what could be experienced in the early years. Of course, if you choose a brokerage account for your child’s Roth IRA, you have the option of purchasing shares in a company that might be of particular interest to your kid. He’s also the author of Make Your Kid a Millionaire.
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Malala Yousafzai is an education activist from Pakistan. One hundred and thirty million girls are out of school. As I travel the world to advocate for them, not every day is easy. Some days I meet girls who have to fight so hard for a right they already have. This summer I met Najlaa, a Yazidi teenager in Iraq. At 14, her parents took her out of school and told her she would be married.
On her wedding day, Najlaa kicked off her high heels and ran away — still in her wedding dress. She wasn’t ready to give up on her education and dreams of becoming a journalist. When she was 16, ISIS invaded her village and forced her to flee again. Today she lives as an internally displaced person in Kurdistan and walks more than an hour to school each day. Girls like Najlaa inspire me to keep working — but I also wonder what else these determined and talented young women could give the world if they didn’t have to work so hard just to go to school.
Some days I’m discouraged by leaders who could send every girl to school, but still don’t. At the United Nations two years ago, leaders committed to ensuring every girl receives 12 years of education by 2030. Since then, donor countries have either flatlined or decreased their aid to education. None of the nine biggest countries in Africa, Latin America and developing Asia have increased their education budgets. Several are even making drastic cuts, putting more girls out of school. Some days are hard — but I refuse to believe the world will always be as it is today. At Malala Fund, we are working to change the world for girls by investing in educators and advocates in developing countries.
These women and men understand the challenges girls face in their communities — child marriage, poverty, conflicts and wars — and are best placed to develop solutions. In Afghanistan, they are recruiting female teachers to work in rural schools. In Nigeria, they are running mentorship clubs to help girls resist family pressure to drop out and marry as young as 13 years old. In Lebanon, they are developing e-learning programmes to teach STEM skills to Syrian refugee girls. Progress may be slow, but I believe we can see every girl in school in my lifetime.