How to invest money in Australia as a teenager

Key takeaways from this article:

• Starting early could make a big difference: Thanks to compounding interest, investing at a young age gives your money more time to grow.
  
  
• You don’t need a lot of money to begin: Many investment options allow investors to start small and build a diversified portfolio over time.
  
  
• Risk and time matter: Some investments carry more risk than others, so understanding your risk tolerance and investment plan is important.
  
  
• Teens usually invest with help: In Australia, you’ll often need a trusted adult to open investment accounts until you reach 18.
   

Why start investing as a teenager?

Many young people assume investing isn’t worth thinking about until later in life. But the earlier you begin, the more time your investments have to grow.

Starting your investment journey early means:
 

• Your money has more time for long-term growth
  
  
• You can learn important basic knowledge about managing money
  
  
• You build confidence making investment decisions

Imagine two people:
 

• One starts putting money aside and investing early at age 16.
  
  
• The other waits until age 30.
   

Even if the first person invests smaller amounts and has lower interest rates, they could end up with more money because their investments had extra years to grow. Starting young also helps you learn about the stock market, different types of investments, and financial planning in a practical way.

Many teen investors start investing with small amounts of income earned from a part-time job, birthday money, or savings.

When it comes to investing for teens, here are some quick tips:
 

• Investors call the things they invest in "assets" and the money they earn from them a "return". They refer to all of their assets as a "portfolio".

There are two main ways investments build wealth:
 

• By growing your original amount of money because the value of your asset has increased, which is known as capital growth, or
  
  
• Through income that comes in various ways, depending on the type of investment you choose. For example, earning rental income from a property you own, or dividends from a company you invested in (more on that below. See: Shares and the stock market). 
   

How does compound interest work?

Compounding interest means you earn returns on the money you originally invested, plus the interest that money generates over time.

Imagine you invest $500 and earn 5% per year.

After the first year you earn $25.

Instead of taking the $25 out, you leave it invested.

The next year you earn interest on $525, not just the original $500.

Over time, this snowball effect could make a difference. This is why investing early matters. When your investments grow over many years, compounding interest could turn small contributions into significant long-term savings.

It’s also why many investment strategies focus on staying invested for the long-term instead of constantly buying and selling.
 

Can you invest money under 18 in Australia?

In Australia, people under 18 can invest, but there are some rules.

Because teenagers haven’t reached legal adulthood, they usually can’t open a regular brokerage account to buy and sell shares by themselves. Instead, most financial institutions require a trusted adult to help teen investors through a custodial or joint account.

Custodial account: this allows a trusted adult (often a parent or guardian) to manage investments on behalf of a minor. The adult makes investment decisions, but the money is usually held for the teenager. When the teenager reaches adulthood, they may gain official ownership of the investments.

Joint accounts: some providers offer joint accounts, where both the adult and the teenager are listed. The adult manages the account and helps guide the teen’s investing experience.

Brokerage account with a parent: many online trading apps allow minors to invest with a parent acting as the account holder. In these situations, the adult typically has the final say on investment decisions.

These arrangements allow young investors to safely learn about stock market investing while being supervised.

Parents and trusted adults can also help set long-term savings goals and choose some investment options. 
 

What are the various ways to invest money in Australia as a teen?

There are many investment options available in Australia. All potential investments have different risk levels, possible returns, and learning opportunities for beginner investors. Some common ones include:
 

Shares and the stock market

A share is a part of a company that you can own. You buy shares in the hopes of sharing a company’s profits in the form of dividends, which are payments made to shareholders usually once or twice a year, when a company is successful.

Shares are traded on stock markets (or share markets) across the world, and stock prices can change daily. In Australia, the best-known one is the Australian Securities Exchange (ASX), where more than 2000 companies are listed.
 

Exchange traded funds (ETFs)

Exchange traded funds can be popular with beginner investors. Instead of buying shares in just one company, an ETF tracks a group of companies.
 

For example, an ETF might track:
 

• the top 200 companies on the Australian Securities Exchange
  
  
• global companies
  
  
• specific industries
  
  

This helps create a diversified portfolio, meaning your money is spread across many businesses instead of putting all your money into one investment.
 

Managed funds

A managed fund (also known as a mutual fund) is when your money is grouped together with other investors and a fund manager buys and sells assets such as stocks, bonds and securities for everyone.

These investment funds may include:
 

• shares
  
  
• corporate bonds
  
  
• property investments
  
  
• international companies
   

For teen investors, managed funds could offer diversification and professional management.
 

Micro investing apps

A micro investing app allows people to invest small amounts, sometimes as little as a few dollars. These apps often round up everyday purchases and invest the spare change.

They could be useful for beginner investors who want to experiment with investing using small amounts of money.
 

Bonds

Bonds are when you loan your money to an organisation, government body or corporation for a specific time and they pay you interest on top of the amount you loaned. These are also a fixed-interest investment.
 

Digital assets

Some young people are curious about digital assets like cryptocurrency. Cryptocurrency (like Bitcoin) includes a range of digital or virtual currencies that are used as an alternative payment method. You earn money when you purchase a cryptocurrency at one rate, and then the value of the currency rises when you exchange or sell it. The risk is that you can also lose money if you exchange or sell at a lower price.

These investments can be higher risk and may experience large price swings. It’s important to understand that these investments carry more uncertainty and can sometimes lead investors to lose money.
 

Fixed-interest investmenents

This is when you invest your money for a set time – months or years – with a financial institution at a fixed or set rate of interest. These are typically considered lower risk because you know exactly how much you are going to earn when you invest. However, they typically have lower returns than other types of investments.

Term deposits are a type of fixed-term investment. If you’re over 18, you can open a Westpac Term Deposit. 
 

Superannuation

When you have a part-time job, under 18 years old, and work more than 30 hours a week, you’ll be paid superannuation (super).

All employers in Australia are obliged to set aside a certain percentage of an employee’s salary into a super account, and you can contribute more if you want.

You can’t withdraw any money from your super until you’ve met some specific conditions, typically you’ve reached a certain age or you’re retiring. As long-term investments go, super may be the longest one you make. You can choose which superannuation fund you join and how your money is invested.

What is the difference between saving and investing?

Understanding the difference between saving and investing is an important part of financial literacy. Both involve putting money aside, but they work in different ways.
 

Saving

Saving usually means keeping your money in a bank account.

Savings accounts typically offer:
 

• ability to earn interest
  
  
• immediate access to money
   

Savings accounts sometimes offer bonus interest when you regularly deposit money.
 

Investing

Investing means using money to buy assets that may grow in value over time. Investing aims for long-term growth, but investments carry more uncertainty than savings accounts.

This means investors may earn higher returns, but there is also a chance they could lose money. Because of this, investors often consider their risk tolerance before choosing investments.
 

What are typically considered to be lower risk options for teenagers?

Many teen investors prefer lower-risk investments when starting out. These options may offer more stability, though the returns may be lower.

A savings account is one of the most common options for young investors. These accounts allow you to store money safely while earning interest.

Term deposits are another way to grow savings. With a term deposit, you agree to lock your money away for a set period. During that time, the bank pays a fixed rate of interest.

These accounts are popular for people because the returns are predictable. However, you usually cannot withdraw money before the term ends without meeting special conditions. 
 

How to get started investing with Westpac

Westpac offers a range of savings products and financial tools that can help young people build money skills and prepare for future investing.

The Westpac Choice Youth account is an everyday (or transaction) account for those aged over 8 to make deposits and withdrawals, payments online or on the Westpac App. There are no account-keeping fees for under 18s.

Spending limits and parental control can help give parents the opportunity to guide and support along the way.

When it comes to building good money habits and setting goals, a Westpac Bump Savings Account can offer bonus interest as a reward for regular saving. There’s also the ability to set up regular pocket money payments, and there are no account-keeping or transaction fees. (Other fees may apply.) 
 

To sum up

Starting your investment journey as a teenager can help build confidence and financial knowledge that lasts a lifetime.

By learning about saving and investing, understanding risk tolerance, and exploring different investment types, young investors can begin building strong financial habits.

When you begin investing, even small amounts of money put in consistently may grow through compounding interest over time.

With guidance from a trusted adult and the right financial support, investing can be a way for teens to learn how money works and start building towards future goals. After all, the sooner you start, the more time your money has to grow alongside you!