How to Invest as a Teenager or Minor [Start Under 18 Years Old]

Investing as a adolescent provides you with a significant fiscal advantage as you get older. not only do you have more time for funds to accumulate, but you can benefit from compound matter to and young tax breaks .
furthermore, investing as a adolescent gives you valuable investing experience for by and by in life. however, figuring out how to start investing as a minor can be difficult. You will need an pornographic you trust to help you set up and cope accounts .
Let ’ s take a look at how to invest as a adolescent, the types of investments teenagers should consider and the best investments for teenagers .

How Old Do You Have to Be to Invest in Stocks?

father daughter smartphone investing medium

Before you consider signing up for one of the best free stock apps on the market and funding your account, you ’ ll want to ask yourself, “ how old do you have to be to buy stocks ? ”

You ’ ll need to know one authoritative rule about investing in the banal market by yourself : you have to be an adult, or at least 18 years old to buy stocks .
Minors can ’ triiodothyronine invest in the stock market by themselves, teenagers under 18 included in that group .
Despite a phone number of apps like Robinhood and Webull looking like perfect fits for teenagers to dive into investing by themselves, you distillery can ’ t legally participate in the stock market by yourself .
If you want to learn how to invest as a adolescent or minor under the long time of majority in your state, you need to open a custodial account through a number of the best investing apps for beginners .

What is a Custodial Account & How Does One Work?

parent child sunset
A custodial account acts as a type of fiscal account an adult maintains for another person, much a minor. The two basic types of custodial accounts are the Uniform Transfer to Minors Act ( UTMA ) accounts and Uniform Gifts to Minors Act ( UGMA ) accounts .
You can set up Uniform Transfer to Minors Act (UTMA) accounts with a large variety of versatile types of investing accounts .
The money in these accounts is controlled by a custodian, typically a rear, and the adolescent or child doesn ’ triiodothyronine have access to the funds until he or she reaches that department of state ’ s old age of majority. For some states that old age is 18 and for others it is 21 .
Uniform Gifts to Minors Act (UGMA) accounts allow assets to be controlled in a custodian ’ second name to benefit a minor without the need for setting up a particular hope fund .
UGMA accounts are held in the minor ’ second name ( meaning the money belongs to the child ), but the list regent can complete transactions on the minor ’ sulfur behalf until they are of legal age to take over the account and its investments as a young adult .
You can use money from either type of report for any purpose and, discipline to certain investment income limits, only falls subject to taxation at the child ’ south rate. This may besides vary by age and scholar status .
For case, let ’ s say you are under age 19 ( careless of scholar status ) or younger than 24 and a full-time scholar. In this situation, your inaugural $ 1,100 of investment income is tax-free. Your following $ 1,100 would be taxed at 10 % .
Anything above that would be taxed at your parent ’ s marginal tax pace. The IRS refers to this as the “ Kiddie Tax. ”
If your parent or defender earn income in a high tax bracket, these accounts become less attractive after the $ 2,200 investment income come. These custodial accounts have no contribution limits .
however, anything over $ 16,000 per year ( or $ 32,000 for a marital couple filing jointly ) means you will need to pay the federal gift tax .
As a solution, deposits made in these accounts rarely exceed this sum in any given year, lest the parents or guardians wish to fall topic to this endowment tax .

How to Invest Under 18: Investing as a Teenager

investment plan for young investors
diversification is necessity for investment strategies at any age. The best investments for a adolescent will include a combination of stocks, common funds, and exchange-traded funds ( ETFs ) .
Stocks are frequently considered the most excite type of investment vehicle, but besides the hazardous .

→ Invest in Individual Stocks

Investing in individual stocks can represent the greatest casual of capital appreciation because they can quickly outpace a broader basket of stocks you hold in multiple companies .
At the same meter, this can create a significant sum of hazard from lack of diversification, exposing you to the ups and downs on one individual company rather of many .
Growth stocks focus on long-run das kapital appreciation as opposed to paying dividends to their investors .
Depending on your investing objectives, you will need to decide whether you wish to invest for capital admiration or for income-paying stocks in the kind of dividends .
Choosing to invest in dividend-yielding stocks as a adolescent can become very lucrative long-run .
Dividends stage payments made by companies representing a share of their profits given back to investors .
The amount you receive depends on the number of shares you own in the ship’s company. In quality companies, dividends often ( but not always ) surface each year .
If you reinvest your dividends into more shares, you will get more dividends in an advantageous hertz .
To trade individual stocks, have a attend at some of the stock apps out there .
Pair them with the stock news apps and you can truly gain an agreement of the market from a young old age .
Consider starting with these stocks for kids vitamin a well as reviewing the stock trade risks kids and their parents should understand .

→ Invest in Mutual Funds

You will besides want to consider investing in common funds. common funds combine investors ’ money to purchase several types of investments, such as stocks, bonds, real estate, and more .
The fund coach is in charge of trading the fund ’ s underlying securities. typically, common funds are safer than investing in individual stocks because the risk is spread out among many investments .
You can besides benefit from the wisdom of technical fund managers. If you ’ re underage, you can have an adult candid you one of the common fund accounts for minors to buy shares in these investments .
You ’ ll besides be able to buy other investments in this account arsenic well, not precisely common funds .
alternatively, you can frequently save money on deal commissions if you purchase funds immediately through a common fund caller .

→ Invest in Index Fund ETFs

ETFs accomplish a alike goal as common funds : provide instant diversification. however, reciprocal funds cost the like no matter what time of day you order them, while ETF prices change throughout the day .
This happens because ETFs trade on exchanges like stocks .
In many cases, ETFs don ’ t have investing managers actively managing holdings a frequently as common funds. In one way, this could mean a more cost-efficient investment because this allows you to pay lower management fees .
This holds particularly true for index funds which track a broad-market index, removing the want for active stock-picking .
My prefer endow strategy relies heavily on ETFs because these provide instantaneous diversification, come with low costs and don ’ t try to outpace the marketplace ’ s performance by taking on besides much gamble .
Because of these reasons, ETFs act as a bang-up investment option for teenagers as they work well as long-run investments .
For case, if the stock market has a downturn, you have time for it to readjust in your favor before you sell. Another benefit to ETFs is that your money is melted .
once you sell, you can use the money for anything you want. last, like stocks, some ETFs make dividend payments .
When you receive these dividends, they may count as qualify dividends, frankincense falling submit to the passive income tax rate. This will cost you less in taxes in the long-run .

Start Investing in Index Funds with Greenlight + Invest

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  • Available: Sign up here
  • Price: Free 1-month trial, $7.98/mo after for Greenlight + Invest

Greenlight + Invest is an investment account for kids that comes paired with a debit card for kids and teens .
It ’ mho easy to use and can double as a savings explanation and banking app for teens. The app will teach you the basics of investing, how to invest in stocks and ETFs, etc .
It works good if parents and/or grandparents are involved in the process because it requires linked accounts from the custodians ’ banks or brokerages .
The all-in-one design teaches them significant fiscal skills like money management and investing fundamentals — with real money, real stocks and real-life lessons .
You can use the investing feature to :

  • Buy fractional shares of companies your kids admire (kid-friendly stocks)
  • Start investing with as little as $1 in your account (with fractional shares)
  • No trading commissions beyond the monthly subscription fee
  • Parents approve every trade directly in the app on individual stocks and ETFs with a market capitalization of $1 billion+

Consider opening a Greenlight Card + Invest account to start investing in a custodial brokerage account for your kids today. The first base calendar month is free to test the merchandise and see if it meets your needs for giving a financial gift to kids .
Read more in our Greenlight Card review .
Our Investing & Prepaid Card for Kids Pick

Greenlight | The Investing App and Prepaid Card for Kids

  • Greenlight offers flexible parental controls for each child and real-time notifications of each transaction.
  • Greenlight is the only debit card letting you choose the exact stores where kids can spend on the card.
  • Parents can use this app to teach them how to invest with a custodial account through Greenlight Max

Greenlight | The Investing App and Prepaid Card for Kids

Learn More

other Investment Accounts for Teenagers : induct at a Young Age

App   Rating (out of 5) Fees Best For Promotions
Greenlight 4.7 $4.99-$7.98/month Teaching investing fundamentals with guidance from parents; allows individual and index fund investing First month free
Acorns acorns logo 4.8 $3/month – $5/month Automated investing in the background into diversified investments $10 sign up bonus when making first deposit at account opening
Stash stash logo rebrand 4.7 $1/month – $9/month Everyday people looking to start managing their finances $5 stock bonus for making a deposit of $5 or more
M1 Finance m1 finance logo 4.3 $0 trading or automated investing; $125/year on M1 Plus subscription for custodial account Fee-free active trading and automated investing $30 sign up bonus with $1,000 deposit

Why Teenagers Should Also Consider Having a Bank Account

savings account
While bank accounts aren ’ thyroxine as stimulate ( and normally not as lucrative ) as other types of investments, there are advantages to opening one .
If you ’ re new to managing money, checking and savings accounts are a useful way to start experiencing the benefits of compound interest and rehearse restraint from spending money .
Plus, once you open a determine account or high-yield savings explanation, you merely need to leave the money alone to start making you profits .
With a high-yield savings account, you can have roast possession as a adolescent, as opposed to a custodial report where you can ’ t access funds until you reach the age of majority .
A high-yield rescue explanation, preferably than a standard keep open bill, will earn you more money. The average interest rate for spare accounts hovers around 0.09 % APY .
Some high-yield savings accounts can about double that rate or amount to far more when interest rates don ’ deoxythymidine monophosphate scrape the penetrate of the barrel like they have in recent years .
The longer you keep money ( including matter to earned ) in the account, the more money you make while you sleep .
It ’ second coarse for these accounts to have you lock your money in for a stipulate come of clock. For teenagers who don ’ t have bills to pay, this normally international relations and security network ’ triiodothyronine an issue .
When choosing a high-yield save account, in addition to the interest rate, take into consideration any compulsory fees and the minimum libra amount .
It can be useful for teenagers to set goals of how much money you intend to save in your report and possibilities for how you might want to spend it in the future .
Make expectations well-defined with anybody who has articulation ownership of the history. Establish who is allowed to contribute funds, take funds out, and see transactions .
A high-yield savings account you might consider with attractive interest rates comes from CIT Bank .
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  • CIT Bank is an online bank which offers competitive interest rates on its multiple products.
  • Earn up to 15x more than the national average interest rate by keeping your cash and other savings in one of CIT Bank’s banking products.

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Related: 18 Best High-Yield Investments [Safe Options to Consider]

Are Micro Investing Apps Worth It?

man sitting at laptop thinking medium
A holocene course among younger generations is the use of “ micro-investing apps. ” Acorns is one model .
These can be a fun, gentle way to start investing. many of these fiscal apps for teens and young adults automatically round up the monetary value of your purchases to the nearest dollar. The rounded up come is then automatically invested .
For exercise, if you buy a drink in for $ 4.25, then the app would set aside 75 cents and invested according to your selections .
Although each contribution is less than a dollar, if you make unconstipated purchases with your linked tease, over clock this come can add up and become a passive voice way to invest without actively remembering to designate deposits .
You can think of these apps as advance piglet banks, or banking apps for kids and teens .
Though, where they outperform a piglet depository financial institution, however, is investing the money in assets that appreciate in value rather of the money sitting there ( and losing value over time ) .
Some money apps will allow you to set specific rules .
For exemplify, you might set a rule that every clock time you get fast food from your favored restaurant, your app contributes an extra dollar to your investments .
Most apps will besides let you set regular or erstwhile contributions .
One of the acme benefits of micro saving apps is that they are a very “ jell it and forget it ” scheme .
The money keeps adding up and you don ’ t need to make any adjustments to the portfolio choice you choose .
In accession to these apps ’ chasteness, they are bang-up for teens because time is on your side .
Your funds have time to add up and any money lost short-run has fourth dimension to rebound .
Related: 9 Best Fractional Share Brokerages to Buy Partial Stocks & ETFs

How to Start Investing as a Minor

begin investing young
If you have the ability to start investing as a minor or adolescent, you ’ ll have a significant advantage when you ’ rhenium older .
You can start small with a micro-savings account, begin with more substantial investments through a custodial bill, or begin saving money with a high-yield save report. All leverage the might of compounding returns to your advantage .
In the end, no matter which method you choose, the oklahoman you get started, the better .
Consider enrolling in a fiscal service like the Greenlight + Invest, one of the better investing apps for teens, to leverage the company ’ second debit card and endow options .
Borrowing on the composition of compounding interest, if you choose to invest barely $ 1 a day from the day your child turns 13 in the Greenlight + Invest platform, it could total a value of $ 2,876 by the time your child turns 18 if you assume a 9 % average annual tax return .
even better, if you choose to continue investing until retirement ( senesce 68 ) through a brokerage explanation, even without contributing far, the child could end up with more than $258,889 .
If you continue contributing $ 1/day from 18 – 68 ? The measure reaches $616,295 if you assume an average annual return of 9 % .
If you increase this sum to $ 5/day under the same assumptions, your investment libra will exceed $2,814,026 .
Consider opening your Greenlight + Invest nowadays and see one of the best ways to invest $1,000 for your child’s future .
Our Investing & Prepaid Card for Kids Pick

Greenlight | The Investing App and Prepaid Card for Kids

  • Greenlight offers flexible parental controls for each child and real-time notifications of each transaction.
  • Greenlight is the only debit card letting you choose the exact stores where kids can spend on the card.
  • Parents can use this app to teach them how to invest with a custodial account through Greenlight Max

Learn More

About the Site Author and Blog

In 2018, I was winding down a least sandpiper in investor relations and found myself newly equipped with a CPA, added insight on how investors behave in markets, and a load of free time. My job routinely required carry influence hours, building complex assignments, and tight deadlines. Seeking to maintain my momentum, I wanted to chase something ambitious .
I chose to start this fiscal independence web log as my future footprint, recognizing both the challenge and opportunity. I launched the site with encouragement from my wife as a entail to lay out our fiscal independence journey and connect with and help others who parcel the lapp goal.


I have not been compensated by any of the companies listed in this stake at the time of this write. Any recommendations made by me are my own. Should you choose to act on them, please see the disclaimer on my About Young and the Invested foliate .

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