When you are a teenager or your child is that age, school, parties, and high school sports are probably the only things you think about. And this is completely normal because every age has its priorities. But why limit yourself or your child to just the basics? Although people at the beginning of adolescence are too young, around the age of 15 they are capable of understanding how life works and that money is necessary for the future.
That’s why most teenagers work part-time jobs at a local fast-food restaurant or at a gas station. But again we ask you the question why would you think short-term and just earn pocket money? Nowadays, it is possible to start investing in much more serious things. then to save for a new smartphone, at a young age. You don’t need your parents to give you big money to get started. Pocket money is more than enough to get started. It’s a long process, so you’ll be at a significant advantage over peers in 10 years. Research has shown that. So keep reading the article because we will answer the question can you invest in the stock market as a teenager and give a brief guide on how to do it.
Can you invest in the stock market as a teenager?
The answer is yes, but there is one obstacle. A teenager is considered to be anyone between the ages of 13 and 19. If you are 18 or 19 years old, then you can invest in stocks like any other adult. It doesn’t matter if you are 19 or 40 years old, it is the same legally speaking. But if you are a minor, then there is an obstacle that is not difficult to overcome at all. Minors cannot have their own brokerage account, so there is something called custodial accounts and that is all you need.
What is the custodial account?
A custodial account means that a parent or relative or even a friend can invest in the stock market for you. Since you as a minor do not have the right to contact an account broker and ask him to execute your trades. It is illegal because you are minor, so someone needs to do it for you. But it is clear to you that it is nothing complicated. They will open an account for you and have control over it. Funds, which in this case are called gifts, will be placed in a custodial account and you can then start investing. The only difference compared to the brokerage account you will have once you become an adult is that they will have to authorize trades for you. This precaution exists so that you do not lose money easily by making beginner mistakes but have someone to monitor you. Other than that, the whole investment process is up to you, and as soon as you turn 18 or 21, depending on the law in your country, the account will automatically become your property.
What parents don’t like about custodial accounts?
Although custodial accounts mostly serve a purpose and are very useful, there are a few things that some parents don’t like that much. The first thing which is not that great is that the money and other assets in the account are counted as belonging to the child and that is why the child will one day receive a smaller financial aid for college. That’s why some people prefer other types of investments, such as a college savings plan. And the second downside is that according to the law, on the day when the child reaches the age of majority, the account becomes his property. Many parents believe that even though the child is 18 or 21 years old, he is still not ready to completely on his own authorized trades, without supervision.
Best custodial accounts
Charles Schwab is always at the top of the list of best custodial accounts, due to its various options. You are offered the opportunity to invest in different things, all without a minimum opening balance. There is also no fixed monthly fee, which is great. It has almost all the same options as the Schwab One, which is an account for adults, the only difference is that it is intended for minors. If you already have your Schwab account, then it will be very easy for you to follow Charles Schwab because you will use the same login.
You, as a parent or your child, may want to invest in the stock market, but you do not have enough knowledge or time to do it yourself but you need help. And hiring a professional is too expensive for you. If this is the case, then FutureAdvisor is the right choice. It is a platform that belongs to the so-called robo-advisor group, which means that computer algorithms will decide on all investments. It will only be up to you to answer the series of questions at the beginning so that the algorithm can calculate how much you want to risk, what your goals are, and so on. You can also change your goals over time. FutureAdvisor charges a fee annually of 0.5 percent of total assets. The fee is charged automatically, so you will have by far the least work here.
You’ve probably heard of Fidelity, as their retirement accounts are among the best and most trusted in the world. But they are also a great choice for custodial ones. The reason is the same as when you choose them for the retirement option, and that is the huge amount of research available to you. As none of us is an investment expert, this will be very useful and all this analysis and research will significantly increase the chances that you and your teenager make the right choice where you will invest your money.
We really liked the comparison, which we read on Loved.com, that every successful athlete started early, so the same can be said that it is better to start investing earlier. If you are one of the advanced teenagers, who are already thinking about their future and want to invest in the stock market, then you should definitely do it. But if it’s something your parents insist on, and you have no desire to do it, then maybe it’s best to wait a few more years until you’re more mature.