I’m Under 18. Can I Buy Stocks?

Video how to invest in stocks under 18

If you’re a teenager, you may be eager to spend your money on things like hanging out with friends, seeing your favorite bands, and loading up on the latest electronics. But a better bet is to use your money to set yourself up for a solid future.

At a minimum, you should put a portion of your money into a savings account so you have an emergency fund for unplanned bills that arise as you get older. Or, you might need that emergency fund for an unexpected expense that pops up sooner – such as if you lose your cellphone and have to pay for a replacement one on your own.

But once you’ve socked some of your cash away in a savings account, it pays to consider investing your money. The upside of doing so when you’re young is getting a long investment window to grow wealth.

When it comes to investing your cash, you have options. If you have earned income, you could contribute to a Roth IRA, which will allow your money to grow tax free. Or, you could put your money into a regular brokerage account and invest there. You won’t get any tax benefits, but you might get more flexibility than you’d get with a Roth IRA.

But if you’re under 18, you can’t necessarily go out and open one of these accounts yourself. Rather, you’ll generally need an adult to serve as a custodian on your account.

When it comes to investing, there’s limited autonomy for minors

You may be motivated to invest your money at a young age because of the financial upside. But if you’re under 18, you’ll usually need an adult to open a Roth IRA or brokerage account you’re buying stocks in.

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That adult will serve as a custodian on your account, so they’ll technically maintain control over investment decisions. They’ll also receive copies of your account statements. However, one thing your custodian does not get to control is the money in your account. That money is yours.

It pays to buy stocks at a young age

You should know that investing in stocks carries risk. You could lose money by putting it into the stock market, especially if you buy stocks at random rather than research different companies individually.

But if you’re willing to put in that effort and invest your money rather than spend it, the payoff could be huge. Over the past 50 years, the stock market has delivered an average annual 10% return, as measured by the S&P 500 index.

So, let’s say you’re 15 years old and you decide to put $2,000 into a stock portfolio that generates an average annual return of 10% through your 70th birthday. At that point, you’ll be sitting on a balance of about $378,000. If that sounds astounding, well, it sort of is. But it highlights the importance and benefits of investing from a young age.

Of course, not many teenagers have a couple thousand dollars to buy stocks with. But if you happen to have that money on hand, then it definitely pays to put it to work.