Teaching a Teenager to Invest (and you can too)

I’m chatting with my 17-year-old sister Mia about how to start investing.  

This is going to be eye-opening - because some of the questions she is asking nobody has ever asked me before. 

I want more of you to understand everything from the basics up; from how the economy actually works, to what the banks do with our money. Questions like, what do I do with my money? What is the point of investing? Is it actually safe?  How do I get my money back? How do companies make me money? How do I know if it's a scam? 

After all, we’re not taught this in school, right? 

You could be completely new to investing; Maybe you're a teenager, maybe you're 17, maybe you're 27, maybe a 47... it does not matter, the principles are the same! So if you have questions, but are maybe a little afraid to ask, or maybe you're even sitting there thinking... I didn't even know I should be asking those questions! 

You are going to love this episode... because if I can teach a 17 year old to invest (starting small), then I know you can too.

xo
Simone

P.S. If you want to continue learning after this, watch the free investing training found at www.mswealthy.com

 

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Speaker 1:

Hey, welcome!  My name is Simone Mercer-Huggins. I am an investor and trader, and so far I've built over seven figures from the ground up. And now this community is doing the same. The Ms. Wealthy movement is here to share tools, resources, strategies, and support on all things, financial freedom tune in for everything, money investing, mindset trading and everything in between. If you want to be a powerful player in the wealth creation game, you're in the right place. So welcome to the kiss, my money.

Okay. We are not taught this in school, right? So if you are completely new to investing, maybe you're a teenager, maybe you're 17, maybe you're 27, maybe a 47. It does not matter. The principles are the same. And if you have all these questions that you know, you want to ask, but maybe you're afraid to maybe you're even sitting there going, I didn't even know the question to ask what are we even start with?  Something that I have no idea about. Then you are going to love this episode. I chat to my 17 year old sister and we talk about starting to invest. Now I will say, this is not the first conversation, and she also has me on tap, meaning what she wants to do with her investments. If she wants to change, what does she do at any point she can call on me. So keep that in mind, because we jumped around in the conversation from question to question, to covering off what she could invest in. And this is going to be eye-opening I think for a lot of you, because some of the questions she is asking, I actually haven't even had asked to me before. And it it's a no-brainer. And I want more of you to understand this from the basics, from how the economy actually even works, what the banks do, what do I do with my money?

What is the point of investing? Is it actually safe? You're going to love this. I talk broadly and I talk specifically, and it doesn't matter where in the world you are. This still applies. Also, I do want to say too, I've already had conversations with my sister about managing money. So she splits her money already into saving and spending. So she has that down. Pat, I taught her a number of years ago and she still uses that as I do. And as everyone does that, I teach that same method because we want to save and also enjoy life now and spend, and then also put money away to invest and make our money work for us and grow wealth. Right. So keep that in mind as you listen, and please do share this because the more teenagers, the people that actually understand this from a basic level, the sooner to the better, because if we can get more of my sister as age investing at the age of 17, Oh my God, their life will literally be changed with the power of long-term investing. So tune in, you're going to love it and please share it.

Speaker 1:

Okay. So can you tell me what you want? I just, before we get started, I want to be clear on what you want.

Speaker 2:

Um, I want to learn to invest. So I have savings. Is that a valid answer?

Speaker 1:

The valid answer is the answer. That's right for you where you went for

Speaker 2:

Like uni or a car,

Speaker 1:

Anything else?

Speaker 2:

Um, and apartment. Yeah.

Speaker 1:

Okay, cool. So do you know what company we're opening an account with?

Speaker 2:

I just, I don't know. It was started with me. Like last time I saw you sign or something. I dunno.

Speaker 1:

Yeah. Vanguard; well done. Um, how much money do you want to start with? Because I know we've had a little bit of conversation about,

Speaker 2:

I saw one of your posts and it was like, you put like a hundred dollars in and then like, and then weekly, you just like automatically invest like five, like $10 or something like that.

Speaker 1:

I thought you had $500, but put aside?

Speaker 2:

I have a savings account, but I didn't know it was going to be towards investing. Wow. What's the savings for life. It's just there. And so I already, like, I already put $25 in it. Um,

Speaker 1:

And so every week you put money to savings and then you spend some money, right?

Speaker 2:

Yeah. But I have a different account for that.

Speaker 1:

Yeah. Great. Perfect. And of this savings, do you split some to invest or is it all just kind of saving for just future saving stuff?

Speaker 2:

It's just like a future, like saving. So it's like a youth saver account

Speaker 1:

Of the amount you save. You've saved. You currently save, how much do you want to put to saving for like saving to spend on stuff and how much do you want to put, to save, to invest and like build wealth? Do you know how much ease do you think you'd like for like car or people or whatever?

Speaker 2:

No, I haven't really thought that far. I just, I have it there and I make sure I try not to touch it.

Speaker 1:

So with any investment into the stock market really is something that's, uh, we don't want to be doing in it with a short term view. Right. We want to be doing it for like longer time. So at least five years. Are you comfortable with that? Yeah?

Speaker 2:

What if I changed banks?

Speaker 1:

Well that's fine. You can change. You can change the deposits that go from your bank to your bank account, but that's okay. That doesn't matter. Vanguard still remains the investment account. Okay. Are you comfortable not touching it for at least five to 10 years?

Speaker 2:

What if I needed take it out for like emergency stuff

Speaker 1:

We want to invest with money that isn't needed for emergencies

Speaker 2:

Well, no, no, this is not in my emergency fund, but I'm just saying

Speaker 1:

Like, so the amount of money you get now, you split it into savings and spending. Right? So now we're just splitting it into spending, saving for something to spend like uni books, a car, cause that's still spending, spending. And then the third bucket is saving to invest, to build wealth and buy assets. That lack that. Should they make you wealthy?

Speaker 2:

Well, I don't get to what happened with that money. Like if you get wealthy, like how, how do you get that money in like in cash?

Speaker 1:

Yeah. Okay. So that's a good question. So you use build it up and build it up and what happens with really any investment? You either earn money. So like, you know how you have, you can have a rental property, like an investment property and the tenants pay rent and then therefore that's income. Yeah. With the stock market, you get, dividends. So they pay money to shareholders. So when you invest in the stock market or should you become a shareholder, does it make sense? And then so you get things done essentially by being paid dividends. That's one way. So you get an income from that. The other way is you keep building your investments and then you can start selling them off when you get lots of, and you build it up to be a lot and you get lots of money in your investment account and you can start selling it off because it's grown a lot. Or you can like sell off a bit, you know, exit the market and take a profit and then use that to buy a property or something. Right. Does that make sense? So do you mean like, what do you do? Do you mean like what's the point or do you mean like….

Speaker 2:

Like, if you invest right. And like you're investing. Um, and so I like it by the end of like five years. Do you have, like, I don't know, like $10,000 or something like that. If you want to use that $10,000 towards like a numb hop black. I don't know something that costs that much. How do you get that out? Oh, you are, you get it out of like the listing thing. Like you want it to be in your like, account that you can like pay, like you can access the money. Yeah.

Speaker 1:

Okay. Cool. Good point. So with say openness investment account, it's still in your name. It's still your money. It's just, instead of sitting in a bank account, it just sits in an investment account because it's pardon your interest. Well, you get, do you mean like bank interest? Okay. So the point with investing in an asset is that it pays you more money. Like it grows in value. So it grows in value rather than being paid, like small bits of interest. If that makes sense. So with a, uh, with a bank account, you get paid interest, but your money doesn't grow in value with stocks. It grows in that. So you might put in $500 and let's just say next year or the year after, then it's worth $550. And then anyone that you keep putting in then is worth more and then more and more, and it keeps building and building and building. So you're also paid interest in the form of dividends. So you're paid in income in the form of dividends, but the biggest pot of where you make money with the stock market is that stock or that fund that you've bought grows in value. And it grows way faster than any interest in a bank account.

Speaker 2:

Well, what else? The stock market, um, like, you know, on the news, like he, the guy talks about it for like, um, increases or like drops or something when, if it drops.

Speaker 1:

Yeah. So you're…. sorry. Say that again.

Speaker 2:

What happens to like my investing though? I like lose it.

Speaker 1:

Hmm. Great question. So a lot of people think that you lose the money, but it's just that it goes down in value. The only way you lose money is if you sell at that point, which is why I said to you before, we want to like have a longer term view, like five to 10 years with investing at like a laced instead of like two years. Because if you want to take out that money in like two years and the stock market drops, we don't want you to be in a position where you have to sell, but you never lose money unless you sell. So the stock market goes up and down and, and down and up and down, right.

Overall, the trend is always up. It always goes up. So all we want to do is just ignore the noise, ignore the people, talking on the news about how this is a crash. And this is a correction because that's what the news is there to do that or hype it up. Yeah. So just don't exit at that point. So just the same way that you, um, um, buying an investment and it sits in your investment account, you can sell that investment and turn it into cash whenever you want. We just don't do that at the, you know, when there's a crash or a correction or when the stock market's going down, okay. Now you'll see lots of news. There'll be like, it's up. And then it's down. And the next day it's up. And then the next day it's down. The whole point is that we ignore all of that. And we just trust and keep following the process of putting money in working towards our goal and building it up. Yeah. That makes sense. Then we need to talk about what you want to invest in, press, anyone press like increasing weight or something. The thing is like all stocks fluctuate and then move up and down at different points. And just because of, uh, one stock has performed really well. It doesn't mean it's going to keep performing.

Speaker 2:

So how do you return to invest in?

Speaker 1:

Great. So the best way is actually through a fund that holds all of the top stocks in one and every like three to six months, months, that fund keeps having the top companies, the top stocks in that fund, you don't have to do anything. It's just does it for you. And that's it. And then that's why it's called passive investing because it's like super lazy, but it's the most effective and you just keep adding money to it. And it keeps holding all of the top companies because it's really time consuming to try and pick. Who's going to be the best, you know? How does that sound? Yup. Sounds good. Okay. Um, and then there's also other options too. You can invest in local shares like Australian Chaz, you can invest in international or combination both. Okay. Do you have any interest?

Speaker 2:

I just wanna make sure it's safe. Don't take my money.

Speaker 1:

When you say safe, can you tell me more about what you mean?

Speaker 2:

Um, like it's like international law or Australian lack. Um, can I hack your info?

Speaker 1:

Can like, can hackers get in and steal your money. Do you mean?

Speaker 2:

Like through the stock market? Yeah.

Speaker 1:

Yeah. So we tend to…….

Speaker 2:

Be like a stock and then you're investing into them, but like, they're not actually

Speaker 1:

Oh, right. Like you invest in a company, but it's not really a company. And then, they take all your money. Yeah. That's actually a really good question. So she might have……

Speaker 2:

For one time on the news, it was like this massive blow up. And there was this company in like China or somewhere. And it was like, um, they were pretending like to be like this company, but they were under like multiple names. And so like, they kept on following it back and then they followed all these investments and they were like, hold on. It's like a fake.

Speaker 1:

Yeah. So that does happen like a lot actually. Um, in fact it happens to millions of people and there's like millions, and I think it might even be a billion dollar industry, the financial fraud industry. So that can happen when you invest in a private fund kind of thing, or like a private money management or like a private financial advisor who say that they're one, but they're not really the reason it doesn't happen with a company like Vanguard is because it's a long established broker. It's government regulated. It's um, a giant commercial company that's been around for decades and decades and decades. And they really just are an intermediary between you and the stock market. When you, have an account with someone like manga, it's kind of like having a bank account where it's really just, uh, a portal for you to hold your assets or hold your money.

 

Speaker 2:

Just like having a bank account is in my sense, like, do you kind of trust your bank to hold your money condo?

Speaker 1:

Yeah. I'm with you there. Um, it's basically like that. So Vanguard, aren't gonna run away and like steal your money, but that can happen if you go to like an individual person who pretends to invest your money for you. Yeah. So that's, I mean, that's a really good question. It can happen, but no, not with them. Then the other question is like, if you invest in a company through Vanguard, that still can't happen because everything that's listed on that you invest in is own the ASX and that publicly listed companies that, that you basically can't be fake. Right? Shall I show you? I'll just show you what we're going to invest in. So we're going to buy an index fund. That's what it's called an index fund. And there's lots of different options. You can buy government bonds, which is basically the government, um, borrowing money.

You can buy a property fund. You can buy a fund that pays out lots of dividends. Instead of tries to grow. You can buy Australian shares, which is what will like buy into. And then you can buy something called a, an international shares. Ethically conscious means like basically means like you invest in companies that have strong kind of values that aren't mess up the environment. Sometimes it's like anti guns. Um, and then you can invest in something called a growth fund where it has like some Australian, some international, some other stuff. But if we just wanted to, and you can buy lots of buy multiple different ones, what's head domain. Hedged means if you invest in international fund, it means that it also manages the difference in the dollar versus the country you're investing. Because when you invest internationally, your local currency is exposed to foreign currency fluctuations. You know how when you buy something overseas, it can cost more because the value of AUD Dollar changes against like the U S dollar, for example, like sometimes it's really expensive and sometimes it's not…..

Speaker 2:

To lose that value or something.

Speaker 1:

Yeah. So hedge means it tries to balance out that. So there's not much fluctuation in at least the, the currency. So if we buying into this fund, it shows you what's in the portfolio, it shows you the performance. And this is important to look at last year, the total returns it and 23%. Wow. Yeah. In 2018, it lost a little bit, but obviously you don't lose money unless you exit 2017 was 12%, 2016, about 11, 20, 12 and 2013 were both almost 20%. So do you know what percent you're getting in your bank account? No. You want to have guests come and look at it now? Yeah. There were point 60% VA. Okay. So less than 1%. Yeah. Yeah. So you know how I showed you that the some years of stuff, Mark was like 10% and then it was like 20% and like all these other big is, is that a lot more than one six? Yeah. So that's kind of, that's the power of investing

Speaker 1:

Less, if you have more than 50,000 and 0.05. So silly. I just

Speaker 2:

That now shocking.

Speaker 1:

Yeah. They only give you use, um, interest on savings accounts, not spending accounts. Yes. That is true. Right. Do you know what the banks do with your money, with your savings or they do with like everyone's money and sitting in savings?

Speaker 2:

I did. And I, I swear to God they pay it. They use it

Speaker 1:

So well, they do use it. They actually invest in the stock market. They take your money and invest it and they make money. You don't get that money. They do. It's just numbers on a screen.

Speaker 2:

So I don't actually have that money in my account?

Speaker 1:

Well, you do like, and if you go to take it out, you'll get the money. But there's millions and millions of people with thousands and thousands and thousands of dollars sitting in savings, account banks, essentially bank on. Most people leaving a lot of a savings there. And so they invest a portion of it. It's still sitting in your account and it looks like it's in your account. So if every single person went and took out that money, then they have a problem. But that doesn't happen. So they invest how they that's, how a lot of banks make money. They're making money off your money. So you may as well be making you money. Yeah.

Speaker 2:

What about, do they take your money? Invest it well?

Speaker 1:

No, because it's invested in the companies and the campaigns, the whole point of companies is they want to grow and they want to make more money. So they take the money to invest back in the companies that you've invested in, but it serves you, it suits you. It's good for you because if you are invested in that company and that company grows, then you make money.

 

So Vanguard is just a broker.

Speaker 2:

Yeah. So how, how did I survive? Surely like the stock market would have to pay, like pay a fee to like have their stock being shown on Vanguard.

Speaker 1:

So you do pay a really small fee to Vanguard, to invest in a fund

Speaker 2:

Doc that you're investing in, like say like, and debt or something and said the stock that's in Vanguard. Like don't, they have to pay a Veep fee to Vanguard.

Speaker 1:

So it's more so that companies pay a fee to ASX because ASX is really the, the, well, it's the exchange to be listed on the stock market. It, it does cost money for any company, but that's just kind of normal. Let's just the cost of running a business essentially. And then Vanguard is just a way for you to invest in it, on the exchange. We're going to get, look at the overview of this fund. Now there is a management fee of 0.1, 6%. The performance that it gives you here is total return. It was 23% after the fee. So you don't actually have to physically pay it. They just take it off all of the money that that fund has made. So then if we look at portfolio, when you buy into this fund, it means you have 305, you own a pot of 305 stocks.

And it'll tell you kind of like what it has. So it has like about 30% of like financial stocks, meaning like banks and stuff, about 10% of like healthcare stocks, that 7% of real estate. Um, and it'll tell you at the moment what their top holdings are. So currently the top holdings are Commonwealth bank VHP, which is like mining and stuff. Um, CSL, which is a really big biotech company. Mecro group is an investment company, Woolworths, you know, them Telstra or after PE. So these top holdings, when it says top holdings, it means of the 305 companies. These are like some of the biggest holdings that they have offense. So this makes up like a really big chunk of their holdings, but this will change all the time. So yeah, it says 30th of April. And so if you look in another three to six months, these top holdings may look the same, or you're probably more than likely see a few different companies in here because you know how I said, the fund constantly updates depending on the fund, every three to six months, you can look here at another time and it'll be like all these different companies that you know, that you need to worry about.

Speaker 1:

Now to public, to list on this stock exchange. It's like a lot, there's a lot of private companies that aren't listed on the stock exchange that are quite big, you know, like MAs like M and M's and like mom's buds, they're not listed on the stock exchange.

Speaker 2:

Where, how did they get money then?

Speaker 1:

I have private investors. You can still invest in companies, just not through the stock market. So they just kind of essentially have their version of Vanguard and you can personally invest in, okay. Was there anything else?

Speaker 2:

You said it was good to invest on this line. So maybe I shouldn't do it next, not low.

Speaker 1:

So one of the biggest perils of any new, or really any investor doesn't matter if you're new or not is trying to do what's called time the market. Do you know what that is? Find a guess when to invest basically no one can time the market. So trying to guess, or trying to like predict is most of the time people lose trying to play that game. No one is like, no one knows what's going to happen tomorrow, which is why the best strategy is always to start. When you're ready, start early. You're starting really early at 17. And to just keep investing is key putting money in regularly. Okay. I'll get, I'll do a deal. If you invest $20 awake, then I will match your investing amount. How's that sound? That sounds nice. Have to keep it up though. Obviously I'll match whatever you put in. Um, because that means your investment account from grow faster. Let's just say we do this for I'll match it for like six months and then we'll review it or something because I want you to build wealth. Even if it's to like, you want to sell the stocks later and then buy a house. That's fine. Cause that a house is, or a property is still an investment. So I think we done. Are we done? Yeah.

Speaker 2:

Thanks for the check. You're welcome.

Speaker 1:

Okay. I hope you loved listening to that episode now, will you do me a favor? Will you share this? Because as I said at the beginning, I want more and more teenagers to start now. And I want this to hopefully be the barrier for you to see how easy and possible it is for you. And really start to understand it. Now, this conversation started from my sister Mia seeing, uh, an Instagram post where I showed the power of compound interest and just investing, you know, 20, 40, $60 a week. So even if you're starting with smaller than that, that's totally fine. But seeing that visually helped her to understand the power of compound interest and how important it is to just be invested and stick with it long term. So head on over to Instagram, you're going to see a bunch of content there. And also if you have any questions, send me a DM. If it's going to break down the barrier for you to get started. I'm so in for that, [inaudible], If you are not part of the Ms wealthy movement yet, make sure you head over to Instagram and hang out with me. There I am at Ms. Wealthy official. And if you need anything else, head to Ms. wealthy.com, you can get all the info that you need. Find us on Facebook as well. And I'd also love if you can drop a review on iTunes, it supports us massively and it means the freaking world.