Financial Investment Planning: How to Help Your 18-Year-Old Get Started on Their Investing Journey
1. Identify and explain the different investment instruments Start by listing the different financial instruments available to invest in, ranking them according to their risk and return potential. Check the operation and characteristics of each option, whether it is the yield or the interest rate it offers, the investment limit, the duration or the blocking period, the penalty and , above all, of the purpose for which the instrument is best suited. Give the child time to understand and assimilate the information, and provide reading material or links to websites that can explain how each works.
2. Purpose of the investment The next step is to understand why the teenager wants to invest. Ask him if he has any long-term goals or dreams that sparked his interest in investing, or if he’s just looking for the fastest way to make easy money to meet his expenses. sharply. It can also be simply an exercise in evaluating one’s own investment skills or the performance of an instrument. Without understanding the reason why he wants to invest, you will not be able to guide him in the right avenue, nor highlight the risks involved in his planning.
3.Fix the amount and time Once the child is clear about the purpose of the investment, he will need to identify the amount he needs and the time he wants to invest. If he does not have a defined goal and simply wants to save to have a large corpus in the years to come, he can start with small amounts deposited or invested regularly. If he has a specific goal, target value and time horizon in mind, you will need to help him calculate the amount needed for the investment. More importantly, he will have to check the feasibility of investing with his limited allocation.
4. Choose instruments The next step is to choose the right instrument. It could be one or more options depending on the funds he has. It could start with a recurring deposit, a fixed deposit, or even mutual fund SIPs. Also explain why options like stocks and gold or buying insurance are not suitable for her stage of life. If he is very keen on investing in crypto, you will need to highlight the extreme risk involved and suggest putting in a small amount that he is willing to write off.
5.Monitor and review Finally, make the child understand the importance of monitoring and reviewing his investment. Whether it is a bank deposit or a mutual fund SIP, he should check it every six months or a year to understand its growth and whether he should reconsider other options based on its performance. . This exercise will be very useful to him in the years to come.
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