Getting Started with Stock Investments as a Young Investor: What Age Requirements Actually Apply?

Starting your investment journey early can seem complicated, but the fundamentals are straightforward—and the math strongly supports beginning as soon as possible. The more years your money sits in the market, the more compounding works in your favor, transforming modest contributions into substantial wealth over decades. Young investors who begin early also develop money management skills that will serve them throughout adulthood. But what’s the real story with age restrictions? Can teenagers actually buy stocks? The answer depends on the account structure you choose.

The Legal Age Threshold for Independent Investing

Here’s the straightforward answer: You must be at least 18 years old to open and manage your own brokerage account, IRA, or investment account without parental involvement. However, this doesn’t mean younger investors are locked out of the market. A range of account structures specifically allow minors to participate in investing when they have an adult sponsor—typically a parent, guardian, or trusted family member.

The key distinction among these accounts: Does the young investor only own the securities, or can they also direct which investments are purchased? This matters more than you might think, as it affects both the learning experience and control levels.

Three Primary Account Structures for Young Investors

Jointly Owned Investment Accounts

Ownership structure: Both minor and adult co-own the investments Decision-making: Shared between minor and adult Minimum age: Typically none, though some providers may set limits

A standard brokerage account owned jointly allows two or more people to share account ownership and investment control. While these are commonly used by married couples, they work equally well for parents and children. The beauty of this structure is flexibility—an adult might handle all decisions when the child is young, then gradually transfer responsibility as they mature into adolescence.

The trade-off is tax treatment. Since both parties own the assets, capital gains taxes apply based on the account holder’s tax bracket. However, joint accounts offer the broadest range of investment options available.

Many brokers now offer youth-focused joint accounts that pair investment access with financial education tools. These platforms typically charge no account fees, require no minimum balance, and allow fractional share purchases starting at $1. Built-in learning modules reward teens with account credits for completing financial lessons, effectively gamifying money education.

Custodial Investment Accounts

Ownership structure: Minor owns the investments Decision-making: Adult manages all choices Minimum age: None in theory

Custodial accounts represent a different approach. Here, an adult (the custodian) opens and manages the account, but the minor is the actual owner of all securities. The custodian can only withdraw funds for expenses that benefit the minor. Upon reaching the age of majority—typically 18 or 21 depending on your state—the young adult gains full control.

These accounts offer tax efficiencies through what’s known as the “kiddie tax” structure. A portion of unearned income avoids taxation annually, while another portion faces only the minor’s tax rate rather than the parents’. Income exceeding these thresholds is taxed at parental rates.

Two legal structures dominate: UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act).

UGMA accounts exist in all 50 states and can hold only financial assets: stocks, bonds, mutual funds, ETFs, and insurance products.

UTMA accounts function similarly but also permit holding non-financial property like real estate or vehicles. However, only 48 states have adopted UTMA (South Carolina and Vermont do not).

Both restrict high-risk strategies such as options trading, futures, and margin purchases.

Custodial Retirement Accounts

Ownership structure: Minor owns the investments Decision-making: Adult manages selections Minimum age: None in theory

If your young person earns income—from summer employment, tutoring, babysitting, or freelancing—they become eligible for a tax-advantaged retirement account. In 2023, minors with earned income can contribute up to the lesser of their actual earnings or $6,500 annually to an IRA.

Traditional IRA option: Contributions are tax-deductible today. Taxes are paid upon withdrawal in retirement.

Roth IRA option: Contributions use after-tax dollars, but growth and withdrawals remain tax-free forever (with limited exceptions before age 59½).

For young workers paying minimal taxes, a custodial Roth IRA makes particular sense. You lock in today’s favorable tax treatment while allowing decades of tax-free compounding—potentially worth hundreds of thousands of dollars by retirement.

Building a Young Investor’s Portfolio: What to Buy

Given their extended time horizon, young investors should emphasize growth-oriented investments rather than conservative positions.

Individual stocks offer hands-on learning. You own a fractional stake in real companies and experience both upside and downside directly. The downside: concentrated risk if a single holding stumbles.

Mutual funds pool investor capital to purchase dozens or hundreds of securities simultaneously. This diversification cushions individual stock declines. However, annual management fees reduce returns over time—especially important to consider across decades of investing.

Exchange-traded funds (ETFs) function similarly to mutual funds but trade like stocks throughout the day. Most are passively managed index funds that track specific market segments. They typically cost less than actively managed mutual funds and historically outperform most actively managed competitors. For teens investing modest amounts across diversified holdings, index ETFs represent an elegant solution.

Why Age Matters: The Compounding Advantage Explained

Imagine investing $1,000 in an account earning 4% annually. After year one, you’ve earned $40, giving you $1,040. By year two, you’re earning 4% on $1,040—not just the original $1,000. Year two generates $41.60 in earnings, bringing your balance to $1,081.60.

By year ten, that single $1,000 has grown to approximately $1,480. By year thirty, it reaches roughly $3,243. By retirement—potentially 50+ years out—your $1,000 could become $7,107. That’s the mathematics of compounding.

The critical variable is time. Starting at 15 rather than 25 gives you a full decade of extra compound growth. Starting at 10 rather than 15 adds another exponential multiplier. There is no substitute for beginning early.

Beyond Single Investments: Education-Focused Accounts

Parents often want to save for children’s futures without involving them directly in investment decisions. Several structures serve this purpose.

529 Educational Savings Plans allow tax-free growth when funds are used for qualified education expenses: tuition, fees, technology, room and board, books, even student loan repayment. Recent changes permit K-12 tuition and trade school expenses as well. Should a beneficiary not attend college, you can redirect funds to a different family member penalty-free or recoup contributions for your own education.

Coverdell Education Savings Accounts (ESAs) similarly support education funding with tax-free growth. Contributions are capped at $2,000 annually per student through age 18 (with exceptions for special needs beneficiaries). Income limits apply for contributors.

Standard Parental Brokerage Accounts offer complete flexibility—any purpose, any amount, any timeline. The trade-off is no tax advantages; all gains face capital gains taxation.

The Bottom Line on Age and Investing

You must reach 18 to independently open investment accounts. However, minors at any age can begin building investment experience through custodial accounts, joint accounts, or parental oversight. The fundamental principle remains unchanged: time is your greatest asset. Every year delayed is compounding power surrendered. The question isn’t whether your age permits investing, but whether you’re ready to seize the advantage it provides.