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TEENS AND MONEY

Start Now and Get Ahead Sooner

The most important thing you need to know about saving is to do it now. As for investing? Start early. Why? Because time is your money multiplier and the most critical factor when it comes to growing your money.

Generally, the following applies when you invest early and often:

. You can invest more money over time.

. Your investments have longer to grow.

. You may be able to achieve your financial goals earlier in life.

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Getting Started

To be a successful investor, you need to have developed some responsible money management skills.

Before you start investing, ask yourself:

. Do you practice good financial habits?

. Have you established long-term financial goals?

. Have you learned principles of good investing?

. Do you understand types of investments and how they work?

. Do you know how to protect your assets?

If you can confidently answer “yes” to these questions, then you’re likely ready to invest.

Even if you are starting your first job, getting ready for college or just beginning a career, you can put your money to work by investing wisely.

Begin with the Basics

A sound investment strategy begins with one simple rule: Pay yourself first. This means you set aside a certain amount to cover your ongoing expenses first, before you invest anything. This also means you spend less than you earn, ensuring there’s a surplus at the end of your paycheck that you can invest. You also want to plan for the unexpected. This means you should start setting aside a little every pay period for an emergency fund. It’s always good to have money for that “rainy day.”

Set Realistic Goals

We’d all like to reach big financial goals. But the more realistic your goals are, the more likely you are to reach them. When setting your goals, do the following:

. Identify Your Objectives

What do you want to achieve with your investments? Maybe you want to retire early. Maybe you want to own a second home. Or maybe you just want your first car. Whatever your goals, identify them upfront, research them and decide if they’re realistic, and then start planning.

. Select a Timeframe

How quickly can you achieve your investment goals? Getting your car may take two years. Early retirement may take 30 years. Be realistic. And keep investing.

Types of Investments

Investing can be as simple as opening as account with a brokerage firm or mutual fund company. These investment organizations offer a wide range of investment services structured to help you invest the way that is most comfortable and convenient for you.

These may include:

. Stocks

Stock is offered, most often, by public companies (those not privately owned). Stock is sold in shares and represents ownership in a company. The more shares you own, the more of the company you own. So if you own 30% of the shares in a company, you own 30% of that company. Depending on the company, stock can be a low-risk or very high-risk investment.

. Bonds

A bond is a debt security, similar to an I.O.U. When you purchase a bond, you are lending money to a government, municipality, corporation, federal agency or other entity known as an issuer. In return for that money, the issuer provides you with a bond in which it promises to pay a specified rate of interest during the life of the bond and to repay the face value of the bond (the principal) when it matures, or comes due.

. Mutual Funds

A mutual fund pools the money of many investors and invests the money on behalf of those investors. The companies that issue these funds manage the pool of money on the investors’ behalf. Most mutual funds are "open-ended," meaning investors can buy or sell shares of the fund at any time.

. IRA's

An Individual Retirement Account (IRA) provides tax advantages for retirement investments. US tax code identifies the requirements for the amount of money that can be invested (annual contribution), withdrawal restrictions and income tax reporting.

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