Parents don’t need stock trading for teens. Stock trading is a great way for teens to develop financial literacy. Is parenting teens hard enough? It feels like parenting teens is never-ending. Here’s the kicker.
Stock trading for teens is one of the best decisions parents can make because it helps set their teens up for financial success when they are older. Teens are encouraged to start thinking about their future and develop financial literacy skills.
If you want to trade stocks for teens, you need to know what to look for.
What Is Stock Trading for Teens?
Stock trading for teens is the same as stock trading for adults. Teens should be aware of the risks involved in investing in stock trading. It might look different if teens own the account. If your teen wants to handle investments, you’ll need a joint or regular brokerage account.
The parent and teen own the account together. This type of account is a good way to teach your teen about money management. The teen can make decisions, but parents can see all the transactions in real-time. Parents help to make sure their teen is making the best decisions.
It is possible for parents to own a regular account with an option to give teens an account as well. This is a great way to introduce teens to the world of investing and teach them how to manage their money.
A custodial account is an account the parent has for the child until they reach 18. The custodian of the account is usually the child’s parent. The custodial accounts require parents to make transactions on behalf of their teenager. Teenagers can learn about investing and money management in custodial accounts.
How Old Do You Have to Be to Invest in Stocks and Start Trading?
Teens must be at least 18 years old to have their own accounts. If a parent opens an account for their child, they can invest at any age. Investing is a great way to learn how to manage money at an early age.
Each stock trading app has different age requirements for custodial or joint brokerage accounts, but there isn’t a minimum age a teen can invest until they want their own account without their parents on it.
What Is a Custodial Investment Account?
A custodial investment account is owned in the child’s name, but the parent manages the assets for the child.
As long as an adult can take responsibility for the account, the custodian doesn’t have to be a parent. The custodian should have the best interests of the child in mind and be willing to take on the responsibility of managing the account. Once they reach maturity, kids and teens can use the funds from custodial accounts. Parents hope they use them for college, retirement, or other financial goals that will help them in adulthood. It’s important for parents to teach their children the importance of saving money early on, so they are better prepared for adulthood.
A custodial account can be a UGMA or UGTMA, but the UGMA (Uniform Gifts to Minors Act) is the most common. There are no contribution limits with this account.
Teens can have stocks, bonds, cash, mutual funds, and life insurance in a UGMA.
Choosing the Right Custodial Account For Your Teen
Like choosing an investment account as an adult, there are certain considerations you should make to set your teen up for financial success. Having these conversations with your teen early on will help them develop healthy financial habits that will serve them throughout their life.
- The costs of holding the account will decrease the teen’s balance. Teens should research the different account fees before choosing one. There might be no fees if you open a custodial account at a brokerage. If you plan to make regular contributions to the account over time, your child will benefit from the long-term growth potential that investing can provide. Ask about trading fees, commission, and maintenance fees. Make sure you’re getting the most value for your money by looking for the best deal. Take into account the fees that will leave your child with the highest profits. When calculating your child’s profits, be sure to factor in any costs associated with the sale, such as shipping or supplies.
- There are different account balance requirements for investment apps. It is important to understand the individual requirements of each investment app before signing up. Some require a minimum opening deposit, while others need ongoing minimum balances. Many banks offer incentives to customers who meet certain requirements. To avoid unnecessary fees or account closings, choose an account where you can maintain requirements. The benefits and fees associated with an account should be researched to make sure they meet your needs.
- When opening an account for your teen, consider the investment choices you want. You might want to talk to your teen about the risks and rewards associated with each option. You want the ability to invest in stocks if you want something more aggressive. You can invest in riskier assets if you want more potential for growth. If you are looking for something more conservative, you may want to stick to bonds, ETFs, or mutual funds. If you want to take a more passive approach to investing, these are some great choices that can offer a reliable return over the long term.
Benefits of Investing in Stocks for Teenagers
You might think teens are too young to invest, but here are some of the top benefits. Teens should always research their options carefully before investing, as no investment is without risk.
- Gain Essential Financial Literacy Skills: Letting teens take control of their financial future by investing young can help them gain essential financial literary skills. When they become adults, investing a normal part of their life makes the transition easy. Ensuring that they have the financial literacy and resources necessary to reach their goals can be done with this.
- Younger teens are more likely to invest when they become adults. Teens can gain valuable experience and knowledge of how to manage money by investing early, which will serve them well when they become adults. They will have money set aside to grow and help them reach their financial goals. They can use the money to create a secure future for themselves and their families. Whether teens invest to help with college expenses, retirement, or any other financial goal, they will have a solid foundation before they legally become adults. This is a great opportunity for teens to learn about money at an early age.
- A Investing young allows kids and teens to have many years to learn to take chances. Young investors with the potential to build long-term wealth can benefit from compounding returns. If things go wrong, they will see the benefit of taking more aggressive risks. Taking risks can result in positive gains, but it is important to be aware of any potential pitfalls that may arise. A solid foundation of financial education will help them reach their goals. They will have the confidence to make informed choices and manage their finances with this knowledge.
- The earlier anyone invests, the more money they will have. You can reach financial independence sooner if you invest early and often. Teens who invest are better able to reach financial independence. This may allow them to make empowering choices in life, such as retiring early or changing careers, doing what they love instead of what they have to do to make ends meet.
Best Apps for Teens to Start Investing in the Stock Market
There are a lot of options for teens when learning to invest. It’s important for teens to take the time to explore their options and decide on an investing strategy that suits their goals. Teens can start investing with thetop apps. Teens can use these apps to learn about investing and financial literacy.
1. Fidelity Youth Account
Parents with a Fidelity account can open a Fidelity Youth account and let teens take the reins. Teens can trade stocks, exchange traded funds, and Fidelity mutual funds with this account.
Pros:
- There are no minimum balance requirements
- Teens don’t pay any fees
- Parents have complete transparency on the transactions and activity, including real-time alerts
- Teens can buy fractional shares
- Access to the Fidelity Dedicated Youth Learning Center
Cons:
- Teens can link their accounts to Venmo, which could encourage unnecessary spending
- Parents must have a Fidelity account
- Cash balances don’t earn interest
2. Acorns Early
Acorns Early is a program for teens to invest when a parent has an Acorns Family account. This robo-advisor made investing with spare change famous, and they promise that anyone can ‘grow their oak.’
Pros:
- Anyone can invest spare change and make it grow
- It takes only a few minutes to set up an account
- Acorns charges fixed fees, so it’s easy to budget
- Teens can round up purchases for automatic investing
Cons:
- The fixed fees are high compared to the amount most teens invest
- Only allows automated portfolios, teens can’t make their own investment decisions
- It can take a long time to reach their goals if they only invest spare change
3. Greenlight
Greenlight Max is the account that Greenlight offers for teens to invest. Teens can save, invest, or spend their allowance money thanks to this app. Teens can use the account to invest in stocks and exchange traded funds. Teens can start building their financial future by investing in stocks and exchange traded funds.
Pros:
- Teens can invest with as little as $1
- Teens can buy fractional shares
- No commissions
- Greenlight has exceptional parent controls that allow parents to limit where kids spend money or how much they spend
- Pays competitive interest rates and offers cash-back opportunities
Cons:
- The monthly fee is high
- Offers limited investment options, as the assets must meet certain specifications for Greenlight to offer them
- Parents must link a custodial account for their brokerage for it to work
4. Step
Step offers teens an introduction to cryptocurrency investing. Teens don’t have to wait until they’re 18 to try this investment option. Teens need parental permission before opening an account. Parents should always be involved in the process of making sure their teen knows how to use and manage a bank account.
Pros:
- Step includes a Visa that teens can earn crypto back from instead of cash back
- Teens can invest with as little as $1
- Step provides educational content to teach about crypto
Cons:
- Step doesn’t offer any advice to help with crypto investing
- Teens can only trade bitcoin on Step
5. Stash
Stash is one of the top personal finance apps offering an investing option. It makes it easy for teens to learn the ropes. It offers a lot of opportunities to grow and develop skills. Teens can budget for their goals with an investment and bank account. Teens have the convenience and flexibility to manage their money with these online accounts.
Pros:
- Teens can use a pre-built portfolio or try their hand at self-directed investing
- Teens can buy fractional shares
- The stock-back card allows teens to earn more stock shares when they spend money with partner brands
- Stash offers the option to invest in value-based investments
Cons:
- Stash charges high monthly fees
- Stash only has four trading windows each day because Stash focuses on long-term investing
6. Ally
Ally offers stock and ETF investments with no commissions, which is great for teens. Teens can use the option of having a portfolio created for them. Many teens are taking advantage of the robo-advisor option to invest in their future and create a secure financial future. Teens can break into the investing world without getting overwhelmed with the app. It helps teens through the process of investing.
Pros:
- No minimum balance requirements
- No commission fees
- Ally offers a wide selection of investment options
- Ally provides extensive research and educational tools
Cons:
- Uninvested cash doesn’t earn interest
- Doesn’t offer fractional shares
7. UNest
UNest is an investment account for families that allows teens to save for any goal, whether college, a car, or even retirement. UNest is unique in that family and friends can contribute easily, and teens can earn rewards when they spend money at pattern companies. It’s a great way for teens to learn how to budget in a safe and secure environment.
Pros:
- Parents and kids can set up recurring deposits
- UNest is easy to use since it’s a mobile app only, and most teens are savvy with technology
- Teens can use the funds for any purpose, including college
Cons:
- UNest charges a flat monthly fee
- Teens must invest at least $25 a month
- UNest picks the investments; teens don’t have a say
8. EarlyBird
EarlyBird is another mobile app for investing for teens. It’s set up as a Anyone can give money to your teens with the UGMA account. A UGMA account can provide your teens with financial security for their future and allow them to save money for college. The gifting aspect of the app is fun because it allows friends and relatives to send a personalized video with the contribution, making receiving the money more personal and fun. It also allows for the safety and security of online transactions. EarlyBird has five portfolios to choose from. Each portfolio is tailored to meet the needs of its investors.
Pros:
- EarlyBird automatically rebalances portfolios
- Teens only have to pick a portfolio type; they don’t have to choose individual investments
- Anyone can contribute to a teen’s investment goals
Cons:
- EarlyBird charges a fixed monthly fee
- Teens can’t explore their investing options by choosing their own assets
- It’s a custodial account, so parents must handle the transactions
9. Stockpile
Stockpile offers a custodial account for teens. Teens can handle their accounts and invest in the stock market with different log-ins on the app. The app allows teens to make their own decisions, even though custodians must approve all trades. The app gives teens access to educational resources to help them become more informed investors.
Pros:
- The app is user-friendly for beginners
- Teens can buy fractional shares
- Friends and family can buy Stockpile gift cards to let teens invest how they want
- No trading fees
Cons:
- Trades only execute at the end of the day, not in real-time
- Has limited investment options
- Stockpile charges a $75 transfer fee if you change brokerages
Getting Started With Stock Trading for Teens
It is easy to start stock trading for teens. Itis possible to learn about personal finance and build wealth. Decide if you are ready to let your teen invest. When you allow your teen to invest, take the time to research and teach them the basics of investing. The rest is easy. You’ll be good to go if you follow the instructions.
Learn the Basics About Stocks
Before opening a brokerage account, help your teen learn about stocks. Explain the risks of investing in stock to your teen. It’s important to educate teens on the basics before letting them loose with their brokerage accounts.
Do Your Research
Help your teen understand age-appropriate research. You can encourage them to talk to adults. If you want to expose teens to third-party research apps, look for one that they are comfortable reading and comprehending.
Decide on a Budget
Help your teen figure out how much to invest. Encourage your teen to make small investments in order to learn how to invest. They should keep some money in a savings account and some for ‘fun money.’ Help them divide their money so they have liquid savings, money for the future, and money for fun. They can easily manage their finances if they set up an automatic deposit into each category.
Purchase Your First Stocks
Once you’ve helped your teen make the important decisions, it’s time to buy their first stock. Depending on your teen’s comfort level, you might invest in one or several. The support of a knowledgeable professional will allow them to practice and develop their own style. Teens can get comfortable with the concept if they start slow and work their way up. Teenagers need to take their time and understand the responsibility of having a credit card.
Monitor Your Stocks
Help your teen learn to monitor portfolios occasionally. Encourage your teen to keep an eye on their investments. If the app you have chosen doesn’t automatically rebalance a portfolio, it’s important to do so as the stock market and your teen’s life change. This will help ensure that your teen’s portfolio is tailored to their individual needs, and will remain optimal for the best possible returns.
Frequently Asked Questions
Stock trading for teens is a great way to start investing. It is a great way to learn how to manage money. They will take these lessons into adulthood and hopefully make good investing decisions. Lessons can pay off with guidance and knowledge.
Can my 16-year-old invest in stocks?
You can only make investments in a custodial account if you are under 18.
Who pays taxes on custodial accounts?
If kids exceed the current thresholds, they are responsible for taxes on their custodial accounts. It is important for kids to understand the tax implications of their custodial accounts so they can make smart decisions about their investments. In addition, any amount over $1,100 that kids earn may be subject to Kiddie Tax, which means the remaining funds are taxed at the parent’s tax rate.
Are investing apps safe for teens?
Before you assume an investing app is safe, do your research. Before you make a final decision, be sure to check online reviews and compare the app with other similar services. The safe apps are FDIC insured and use bank-level security, including two-factor encryption.
Why is it important to invest at an early age?
Your child will have more money in adulthood if they have more time to grow their money. It is never too late to teach your child the importance of saving and investing. If your child wants to invest in retirement at a young age, the earlier they start, the more money they will have. The amount of money saved over time can be changed by the power of compounding interest.
The Bottom Line
As a parent, trading stocks for teens is a great idea. It gives them an opportunity to earn money and teach them responsibility. No matter where life takes your child, you will give them a head start on their financial life. It will help to teach them about finances now. It is a great way to set up a financial foundation and learn the basics of investing at a young age. Building wealth over time and having the opportunity to take advantage of compounding returns can be provided by starting early.
