How to Invest Under 18: Getting Started

Teaching your teenager boy/daughter to invest is one of the best things you could do for them. Learning to save money at a young age will help them become responsible people. Not just that, but there are several other benefits too.

Teens who learn to invest money start way ahead of their peers. To learn investing, you should always start with the basics. If you are a teen and want to know how to invest under 18, you are in the right place.

Can Teens Under 18 Invest?

Many of you are under the impression that teenagers or minors cannot invest. However, this is not true. There are certain special types of accounts that allow minors to invest in stocks, bonds, and securities. These accounts can be opened up by an adult on behalf of a minor. By opening such an account, you can start saving for your child’s future. That being said, now let’s look into some of these accounts.

  1. Custodial Account UTMA/UGMA

One of the most preferred ways for teens to invest is by opening a custodial account. This is a type of brokerage account that is meant for a minor. A custodial account can be set-up by an adult on behalf of their child. As a custodian, they have the right to manage the account and withdraw cash from it. However, the funds transferred in the account belong to the minor for who the account is opened. The main purpose of opening a custodial account is to secure funds for your child’s future education and other benefits. You can open a custodial account at any bank or financial institution.

  1. Minor Roth IRAs and Minor Traditional IRAs

You can open up a minor Roth IRAs and Traditional IRAs for your kid when he/she is under 18. This will allow them to start saving for their retirement. Along with that, it will also offer them many other benefits. Opening these type of accounts are best because they are low on taxes. However, they will be charged a higher tax percentage later in life. You can set up these types of accounts at a brokerage firm or other financial institutions.

Teaching your child to invest and save for his/her future is a responsible thing to do. This will spare them from facing financial crisis later in life. It will also give them a kick-start in life.

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