It's never too early to start thinking about your financial future. Getting a hold on your finances and learning how to handle money are skills that will last you a lifetime. After all, money is power, and understanding personal finance is the ultimate way to wield that sense of financial power. There are plenty of things you can do to get better acquainted with your finances; building a savings account and learning how to budget are helpful money habits that people of any age can practice. A great way to begin your journey to financial health is to start saving for your emergency fund so you have cash on hand for the little (or big) surprises that life tends to throw at us.
If you're feeling ready for the next step after your initial savings and you want to learn more about investing, it's never too soon to start thinking about it. But if you're on the younger side, getting involved with the stock market might pose a bit of a challenge at first. Here's exactly what you need to know about getting started in stocks.
How old do you have to be to invest in the stock market?
Just like voting, playing the lottery, and joining the military, the magic age for opening your own account to invest in the stock market is 18. However, there are some pretty easy ways to work around those restrictions, and the reality is you're never really too young to invest, said Mary Ryan, vice president of trading at E-Trade Financial. "Even if you can't open an account yourself, your parents or really any adult over 18 can open one for you," Ryan told POPSUGAR. "Most choose a custodial account, which you can easily open at a digital brokerage. It's a big step in the right direction for instilling solid financial know-how among the younger generation."
Starting on an investment journey, especially when you're younger, can have big rewards. "Investing early puts time on your side due to compounding interest, which basically means your account growth accelerates due to the longer timeline until you need it," Ryan said. That means for those who have the ability to invest, starting as soon as you're able can lead to major benefits. However, Ryan does advise prioritizing paying down any high-interest debt first.
How do you start investing in the stock market?
How should investors start out? Well, step one is to educate yourself, said Dheerja Kaur, director of product at Robinhood. "First-time investors can start by brushing up on financial lingo and spend time learning about the markets," she told POPSUGAR. "Financial news can also be helpful in staying up to date on the markets. There are a variety of resources, such as articles, podcasts, and newsletters." Ryan added that investors also can try paper trading, which is simulated trading that allows an investor to practice buying and selling without risking real money. That way, investors can test-drive any investing idea.
A potential place to start in investing is fractional shares, which allow investors to invest in partial shares of stocks and ETFs rather than entire shares of stocks. "Investing in the stock market doesn't mean you need to have millions, thousands, or even hundreds of dollars to get started," Kaur explained. "Fractional shares are a great way to get started and provide unique investing opportunities to people who might not otherwise be able to participate in the stock market."
Another important thing to keep in mind? Research the stocks you are considering investing in, and make sure you believe in the value of the company, Ryan said. "I also chose stocks that I was familiar with and an actual consumer of the company — everything from subscription services to everyday products to the stores I shopped at," she added. "If I believed in the company on a personal level, I was more confident in the investment decision."
Bottom line, said Ryan: "Young traders should have a handle on their goals, risk tolerance, and time horizon before going all in. But starting early will help develop a strong financial sense, and with time on their side, the runway is long for potential returns."