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Ask Paul: What is the best investment option for a teenager?

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Q. My daughter is 17, in her final year at school and works part-time (about 12 hours a week).

To date she has savings of about $2500 parked in a bank account and she would like to plan for her future by investing her savings somewhere other than in the bank.

I'd appreciate your advice. I have had a look at an Australian share fund (minimum investment $2000) but I am concerned about the management fees.

Lea's 17-year-old has a part-time job and $2500 in savings. What is the best investment for a teen who would like to have a house deposit in 10 years?

Would you consider investing in a few select shares as an option, though I do think a share portfolio needs to be actively managed?

I'd appreciate any feedback on managed fund option providers and what you consider are good investment options for a young person who would like to hopefully have a healthy deposit for a property in the next 10 years. - Lea

A. It is just fantastic, Lea, to see a young adult building savings and learning about investment.

I agree with your comments about fees.

Maybe a good solution is to go with an indexed fund managed by Vanguard or BlackRock.

You can use their local or international options for a tiny fee - just a fraction of 1%.

Equally, you could use a low-cost exchange traded fund, and there are plenty of these available.

I am just delighted that your daughter will move into her adult life not only with an investment plan but she will also be developing the skills to create wealth.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the television show Money, radio, and most notably this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is Chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.
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