Can Teenagers Invest In The Stock Market?

So, can teenagers invest in the stock market? I have already talked about how powerful investing for kids can be. Of course there is an unlimited potential from the stock market and the younger you start to more likely it is that you can lead a wealthy life at a young age.

Unfortunately kids under the age of 18-21 (depending on the state) cannot directly invest into the stock market. They can however enter through the backdoor by using something called a custodian account.

Custodian Account

Basically a custodian account is an account that is in the child’s name, but opened and controlled by an adult.

There are two types of accounts, UGMA (uniformed gift to minors act) in which case the adult would gift a dollar amount to open the account and UTMA (uniformed transfer to minors act) in which an adult would transfer stock to that account. Once the money or stock is given it cannot be taken back.

The account is then under the control of the adult until the teen is old enough to manage the account themselves. (Somewhere around 18-21 depending on the state) Once they reach that age the adult can then give up control of the account to the teen.

The benefits of this account are numerous.

1. More potential

The longer you are in the stock market the more potential it has.

2. Learning at an early age

The plan can help kids learn how to invest their money at an early age giving them a giant leap over their peers.

3. Adult Supervision

Remember the adult has final say on how the account is invested. This can help an experienced adult prevent their child from making any rash decisions that could cause major losses in the account.

Final Words

A custodian account can be opened at any financial institution. Make sure that you fully understand any rules and regulations that that institution may have.

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