What is investing?
Did you know you can put money into an account and watch it grow over time? That’s what happens when you invest your money. There are things that you can invest money is such as stocks, bonds, and real estate. To understand how this works, we need to go over some investing words.
Brokerage Account
The kind of account your parents can open for you so that you can invest your money is called a brokerage account.
Stocks
A stock is a very small part of a company. When you buy stock in a company, you own a tiny piece of that company. Why would you buy stocks? When you put your money into a successful company, your money will grow, too.
Bonds
A bond is a loan from an investor to a borrower, such as a company or government. Why would you lend money to the government? For example, the government needs to build roads or parks. When you help by loaning money, the government pays interest to you in return.
Real Estate
Investing in real estate is when you own properties or land.
How does investing work?
When you put your money in these places, this is the act of investing. On yearly average, the stock market gives a return of 10% annually. Are you good at math? Well, let’s say you make a one-time investment of $100 into a stock. Over 20 years you could expect to make $672.75! All because you made one investment!
How did this happen? By compound interest. After year one, your $100 becomes $110. After year two, your $110 becomes $122.10. And this continues every year, as long as you don’t take any money out of your investment!
How much money do you need and when do you start?
You probably want to know when you should start investing? Well, I’ll give it to you nice and simple: right now! The earlier you start investing, the more time your money has to grow! Compound interest shows us this is true.
Now you might be wondering how much money you need to start investing? Some people say you need to be rich to start investing, but note this: that couldn’t be farther from the truth! You don’t! You can start simply by investing in smaller, cheaper stocks just to begin learning.
Who should invest you might be asking yourself? Well, please hear me when I say, it isn’t just for grown ups in tight fitting suits! Anyone can and should invest, including you!
Thank you for reading! Sincerely,
Olivia Bryant
Girl Knows Money 