A dollar today is worth more than a dollar tomorrow. Let your money grow on its own with these simple strategies.
It’s no secret that the older you get, the more expenses you become responsible for. That’s one of the cruel realities of becoming a teen. A lot of teens begin working as soon as they become eligible to work. Of course, when they begin working its more so to have the capacity to buy the things they want (rather than what they need). What’s also true is that many teens don’t know how to grow their wealth aside from the money they receive from their job. There’re so many ways to grow your wealth with little to no effort that many generations prior didn’t have. Here are the four best ways to accumulate money as a teen:
#1: High-yield savings account
It’s no secret that a savings account is one of the most common ways to build your wealth. Most people, however, put their money in one of the bigger banks, such as Citi or Chase. These banks pay a very low interest rate, roughly around 0.1-0.2%. It’s best to put your money in a bank that pays a higher interest rate.
It is quite common that the smaller banks, such as regional or local banks, pay higher rates than the larger ones. Non-financial banking institutions and online banks also tend to pay higher rates. SoFi, for example, offers a 4.5% APY on their savings accounts.
Imagine earning $46 a month on interest in a $1,000 savings account with SoFi. Accumulate that for a whole year and you’ll be making at least $552 a year on interest. Compare the same $1,000 savings account with a 0.1% APY, and you’ll only be making $1 a month, or roughly $12 a year. Finding a high-yield savings account is game changing, and it builds your wealth effortlessly.
#2: Certificate of Deposits (CDs)
The alternative to savings accounts are certificates of deposits (CDs). Just like savings accounts, CDs offer interest rates for your money. However, the biggest difference is that once you put money in a CD, you can’t take out the money for the period of time the CD is for. If you do, you get penalized and lose some of the interest you accumulated.
CDs are usually offered in terms of 6 months, 12 months, or 18 months. Most banks will allow you to transfer your money into a new CD once the original CD matures. As I mentioned earlier, the larger and more popular banks offer low APYs on savings accounts, but they tend to offer higher rates for CDs. The rates on a CD vary depending on what the interest rates are from the Federal Reserve. The higher the rates are, the higher the CD rates will be and vice versa.
The highest I’ve seen a CD rate be was 5%, so the rates can definitely be attractive. One thing to keep in mind as well is that the longer you keep a CD in for, the more likely the rates will be lower. Anything over an 18-month CD usually begins to offer lower rates due to uncertainty in the economy. Remember, if you choose a CD, the amount you put into it can’t be touched for the amount of time the CD is for.
#3: Stocks that pay dividends
Perhaps everyone’s favorite investment, the stock market is a great route to go if you like to take on risk. However, there are some safer stocks to choose from that will give you passive income, such as dividend stocks. A dividend is a payment that companies make to their shareholders in relation to how many shares of the company they have. The higher the company’s earnings are, the more they can pay out in dividends. These payments are usually every quarter (every 3 months) and offer a great way to earn a few bucks every few months. The more shares of a company you have, the more your dividend payment will be.
Every company will offer a different dividend payment, some companies have been known to offer more than a 10% dividend yield. When choosing a stock to invest in, you should do research and see what analysts think about the company’s future and see if they have room for growth over the next few years. If a company starts performing terribly, chances are they will lower their dividend yield. Most of all, don’t chose a stock solely because if their dividend. Pick a stock that you think will go up in a few years to the point where you can make a nice return when selling the stock along with your dividend payments received. If you’re lucky, you’ll have made at least a 10% return on your stock!
#4: Scholarship money
This probably sounds so confusing, but you can actually grow your wealth through scholarship money you earn in college. Let’s say you win a scholarship for $20,000 per year, but your tuition is only $10,000 per year. The school has an obligation to pay you the spare $10,000 that you won. Believe it or not, it’s a method that earned me roughly $10,000 in my four years of college. The point is that if you can still apply for scholarships during college, do so because you can end up winning the extra money that’s leftover and invest it elsewhere. Rather than wasting your free time on campus staring at your phone, apply for some scholarships and see where that takes you!
There are obviously more ways to invest your money, but I listed these as the four main strategies I wanted to get across for a teen that has just started working. All the options I mentioned are investment worthy with two or three paychecks worth of savings. Don’t let your money sit around doing nothing. Let it grow on its own by putting it in the right pot.
