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July 31, 2021, 9:59 a.m. EDT

5 investing lessons that could make your working teen wealthy

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Paul A. Merriman

Teenagers and college students seem to get the short end of the stick in many ways. But the job market this year — with so many employers having trouble getting workers — spells good news for young workers.

Savvy parents and grandparents can leverage this situation — more jobs available, higher starting wages and even occasional signing bonuses — into an important long-term teaching opportunity.

Ideally, your child or grandchild can benefit mightily from a handful of investing lessons.

Read: How to have substantially more money when you retire without saving one additional dollar

And with so many young people earning thousands of dollars a year, you can help them learn lessons like:

  • Pay yourself first.

  • Start when you’re young.

  • Choose investments wisely.

  • Use an easy recipe for financial magic: compound interest plus lots of time.

  • Seek a match to double what you save.

Here’s how it could play out this summer.

Let’s assume you have a grandson who’s earning $3,000 this year, and that he does not absolutely need all of it right now.

At your urging, he sets aside $300 for his long-term future.

Already he’s made sure he “pays himself first” so that there’s something left over. And being young, he’s started very early.

Then, again at your urging and with a bit of basic education thrown in, he chooses an asset class that should help his money work hard for him over the coming decades.

Naturally, you tell him to invest in stocks instead of bonds and to invest in index funds instead of the individual stocks that fascinate his friends. Small-cap stocks, you teach him, have above-average expected long-term returns; you assure him he will eventually be happy he made that choice.

He trusts you and so he does it.

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