Can Kids Invest?

How Can a Kid Buy Stocks?

A stock is a tiny piece of a company. Own a piece of the company that makes your games or your shoes, and when the company does well over many years, your piece is worth more. Kids can’t open accounts alone — a parent opens a custodial account where the money belongs to you and the parent steers until you’re grown. Ask about “fractional shares”: even $5 can buy a slice of a big company.

What Should a Kid Invest In?

Here’s the grown-up secret nobody puts in ads: the winning move is usually boring. Instead of guessing one company, most smart investors buy an index fund — a bundle of hundreds of companies at once. If one company flops, the other hundreds carry you.[1] Picking one favorite company to watch and learn is fun; the bundle is where serious saving goes.

Why Does Starting Young Matter So Much?

Because of compound growth: your money earns money, then that money earns money. Time is the magic ingredient, and kids have more of it than anyone.[2] See it yourself on the compound interest calculator — ten dollars a week starting now turns into numbers that look like typos by the time you’re your parents’ age.

At 13, You Can Have Your Own Investing Account

Everything above needs a parent to run it. That changes at thirteen. Two companies — Fidelity and Schwab — make accounts built for teenagers, and they are the only two that do.[3][4] Here is what is actually in one:

• Fractional shares. The big one. You do not need $200 to buy a $200 stock — you can buy $5 worth and own a sliver of it. This is why investing is possible on allowance money at all. Kids your age could not do this fifteen years ago.
• Index funds and individual stocks — the boring bundle and the one company you want to watch, exactly as described above.
• A debit card and a cash side. Money you are not investing just sits there like a savings account, and you can spend it.
• No fees at all. No monthly charge, no minimum to open, no commission when you buy. Free genuinely means free here.
• Research tools built into the app, so you can look a company up before you own a piece of it.

And what you cannot do, on purpose: no borrowing money to invest, no options, no futures, no penny stocks.[4] Those are the fast ways grown-ups lose money. The accounts simply do not offer them to you, which is a good thing.

The one real difference between them

It comes down to whose name is on the account.

• Fidelity Youth Account — the account is yours. You place the trades. A parent sees everything and needs their own Fidelity account, but the choices are yours.[3]
• Schwab Teen Investor Account — you and a parent own it together. You can both trade and move money, and your parent controls the debit card. Schwab also gives you $50 to invest for finishing a short beginner course in your first 45 days.[4]

Neither is better. If you want the decisions to be fully yours, that is Fidelity. If you would rather decide together — or if that is the only way you get a yes — that is Schwab. The account that actually gets opened beats the perfect one that does not. Your parents can compare them in detail in Teen Investing Apps Compared.

You Can Also Invest Alongside a Parent

Here is something most kids never find out: you may already have investing accounts with your name on them. Two are worth asking about.

• A custodial Roth IRA. If you have earned money from work — babysitting, mowing, a real paycheck — a parent can open one for you, and the money grows for decades without ever being taxed.[5] It is the most powerful account a person your age can have. More in Roth IRA for Kids.
• A UTMA custodial account. Parents or grandparents sometimes open one when you are little and put gift money in. It is invested money that legally becomes yours at 18 or 21, depending on your state.[6]

A parent has to place the trades in these — that is the law, not a rule they invented.[6] But nothing stops you from being there when they do it, and that is the part worth asking for.

Why bother, when you cannot click the buttons yet? Because the account becomes yours whether or not you understand it. Someone who has been watching their own money for five years arrives at 18 knowing exactly what they own. Someone who never looked arrives with a password and no idea — and that is usually when the money goes.

It is also the cheapest way to learn there is. You get to watch real money rise and fall without being responsible for the decisions yet. That beats reading about it, and it is far cheaper than working it out at twenty-five.

Parents: the account details live in Kids’ Accounts Compared and the teen accounts comparison. Back to Money Questions for Kids.