What Age Should You Start Investing?
The correct answer to what age should you start investing is any age. Okay, so a two-year-old won’t get much out of learning how to invest. However, whatever age a child is ready to tackle this challenge, they should be encouraged to do so.
What you learn at an early age is usually carried through to adulthood. Therefore, when someone reaches the age of six, for instance, this may be a good time to get started. Six is not an absolute age. It’s just an age where most kids are likely to be receptive to the idea. Of course, if you are reading this and were not able to start then, you should consider this advice for your kids.
Does this mean if you don’t start early you will be bad at investing? You can learn to invest at any age. The point is it becomes a natural part of someone’s life when they learn it early. If you didn’t have the pleasure of learning investing when you were young, you just need to take steps to do so now.
Fun for the Whole Family
You can make it a family activity of learning and sharing. You can treat it the same as an investment club where everyone is assigned specific duties, i.e., research, analysis, etc. Depending on the ages of your kids, you may want to supervise this aspect of the process.
Brokerage firms don’t allow people under a certain age to open accounts. You will have to do it for your kids. Of course, you will need to determine how much to fund the account and how future allocations will be made. One idea is to increase their allowance by a certain percentage with the intent they put that increase into their investments.
Should You Paper Trade?
Another option is to paper trade with your family. While everyone can still learn from this process, it’s not the same as having real money to watch and grow (or lose). When kids see how their investment grows and what impact that has on their actual money, they get excited by the process. It can motivate them to keep going. Paper trading may lose its appeal due to having nothing invested.
You could tie an incentive for anyone who makes a certain target in their paper trading account. That incentive could be monetary or not. That is entirely up to you. It should be something that your kids will get excited about.
If you haven’t learned about investing at an early age and want to play catch up, consider joining an investment club yourself. This is a great way to meet people and share the common goal of learning how to invest. It’s also fun to watch your money grow as a group. Try to choose a group that has a structure to it. These have become less popular over the past several years. This is largely due to the mistrust of Wall Street ever since the too big to fail bank bailouts. However, investing is making a resurgence, for one reason or another.
If you are interested in joining an investment club, one of the biggest is offered by BetterInvesting.org. They have a complete process on how to get started and can help you find people to join with. Disclosure: I have no association with this group. I just happen to be familiar with their service and have heard they are reputable.
You could choose to do it yourself. There are plenty of resources available to help you with your financial education. That is, after all, what this website is all about. The best advice for doing this is to take it slow. Only invest when you have a good grasp on the concepts, and stay away from all the hype.
When you start learning about investing you will sign up for newsletters dedicated to the subject. That’s great. Just keep in mind that newsletters are designed to sell products and services. This isn’t to say you won’t learn from the free information offered by signing up. It’s just that you need to be aware that you are on their list and they will try to promote you from time-to-time. The high-quality newsletters won’t bombard you with promotional offers.
While you don’t need to join a formal club, it’s not a bad idea to sign up for forums related to investing. There are plenty of members on these forums who have several years’ experience. They can give you some advice, although you have to take much of it with a grain of salt. Investing forums are notorious for steering people in a particular direction, just to drive the price of a stock in one direction or another.
The Emotional Impact of Investing
You need to be aware of a major tenet of investing. It’s one I personally came up with. Here it is:
There is no amount of instruction that can prepare you for the emotional impact of having real money at risk!
You can read all about the dynamics of investing, how to choose the right companies, etc. However, when you hit that buy or sell button, your money is at stake and your emotions are on high alert. There is no getting around this and there is no substitute for getting the necessary experience. The good news is you will get better as you progress and you will learn to keep calm, even if some of your investments take a turn or the worse.