Gold as an investment

How to help your 18-year-old start his investing journey

Sep 24, 2022

Synopsis

Pick investing instruments that offer safety as well as exposure to the child who has limited funds but unlimited curiosity.

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When your child turns into an adult at 18, he will be raring to go in every aspect of life, be it education or experimenting with money. However, unless he is already earning through a hobby or a startup of his own, he is unlikely to have sufficient funds to make large investments. Since monthly allowance may not be enough for him to invest bigger sums, he could start small. Or, if he shows a keen interest in knowing about various investment avenues, you could ease his curiosity by offering some financial help. Here’s how you can go about starting your 18-year-old on his investment journey.

1 .Identify and explain various investing instruments Start by listing various financial instruments that are available for investing, categorising them according to their risk and return potential. Tick off the working and features of each option, be it the return or interest rate that it offers, the investment limit, tenure or lock-in period, penalty, and most importantly, the purpose for which the instrument is best suited. Allow the child time to understand and absorb the information, and offer him reading material or links to websites that can explain the functioning of each.

2.Purpose of investment The next step is to understand why the teenager wants to invest. Ask him if has any long-term goals or dreams that have prompted his interest in investment, or is he just looking for the quickest way to make easy money in order to meet his ballooning expenses. It could also simply be an exercise in gauging his own investing skills or the performance of an instrument. Without understanding the reason he wants to invest, you will not be able to guide him towards the appropriate avenue, or highlight the risks involved in his planning.

3.Fix the amount and time Once the child is clear about the purpose of investing, he will have to identify the amount he needs and the time for which he wants to put in the money. If he has no defined goal and just wants to save so that he has a large corpus in later years, he can start with small amounts deposited or invested regularly. If he has a specific goal, goal value and time horizon in mind, you will have to help him calculate the amount needed for investment. More importantly, he will have to check the feasibility of investing with his limited allowance.

4.Choose the instruments The next step is to pick the right instrument. It could be one or multiple options depending on the funds that are available to him. He could start with a recurring deposit, fixed deposit or even mutual fund SIPs. Also, explain why options like stocks and gold or buying insurance is unsuitable at his lifestage. If he is very keen on investing in crypto, you will have to highlight the extreme risk involved and suggest putting in a small amount that he is willing to write off.

5.Monitor review Finally, make the child understand the importance of monitoring and reviewing his investment. Whether it is a bank deposit or mutual fund SIPs, he should check on it every six months or one year to understand its growth and whether he needs to reconsider other options depending on its performance. This exercise will stand him in good stead in later years. IF YOU HAVE A WEALTH WHINE, WRITE TO US All of us have been in a financial dilemma when it comes to relationships. How do you say no to a friend who wants you to invest in his new business venture? Should you take a loan from your married brother? Are you concerned about your wife’s impulse buying? If you have any such concerns that are hard to resolve, write in to us at etwealth@timesgroup.com with ‘Wealth Whines’ as the subject.

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