How Old Do You Have to Be to Buy Stocks?

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Age to Buy Stocks
In the US, you must be 18 years old to invest in stocks. This is because children aren’t legally able to sign contractual agreements, and people are considered children until they reach the age of 18. However, you can invest on behalf of your child.

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The prospect of starting to invest in stocks can be an exciting one, but there are rules. For one, there’s an age requirement.

So, how old do you have to be to buy stocks?

In the US, you must be at least 18 years of age to buy stocks, which means children under that age can’t start investing in stocks yet. 

How old do you have to be to trade stocks? Same, at least 18 years old.

That being said, there are potential workarounds when it comes to age limits and investing in and trading stocks. For a more expansive answer to “how old do you have to be to buy stocks”, keep reading or use the links below to navigate the post.

How Old Do You Have to Be to Buy Stocks in the U.S.?

You might be surprised, thinking “You have to be how old to buy stocks?”. Finding out there’s a restriction can come as a surprise for many parents and financially savvy teens.

According to US law, you have to be at least 18 years old to invest in stocks in the U.S.

Eighteen is the age of majority in most of the U.S., which is the age at which a person is legally recognized as an adult. This is also the age at which a person is able to legally sign a contract. 

In fact, children under 18 aren’t able to open any investment accounts without the consent of a parent or legal guardian. In this sense, children can’t make investments in their own name until they turn 18.

While children under the age of 18 aren’t legally allowed to purchase stocks in the U.S., there are other types of investments you could potentially use to build a financial future for your children.

Some examples of investments that work for children under the age of 18 include: 

  • Education savings accounts
  • 529 plans
  • Custodial Roth IRA

The best investment for your child depends on your financial situation, whether you’re saving for education expenses, and several other factors.

If you want to get your child started with investing as soon as possible, you may want to consider talking to an investment advisor. A financial expert may be able to help you decide what type of investment account(s) to open and help you get started.

Why Is There an Age Restriction for Buying Stocks?

As we mentioned previously, 18 is the age at which a person is considered a legal adult in most of the US. There are lots of things children can’t do until they reach the age of 18, including buying stocks. 

So, why exactly is there a minimum age for buying stocks?

The biggest thing you have to remember is that children under the age of 18 can’t legally enter into a contract. Because an individual must enter into a contract to open an investment account, children aren’t able to open investment accounts until they reach the age of 18. 

This is true for opening other types of investment accounts in addition to buying stocks. For similar reasons, children under the age of 18 are unable to get a credit card in their name.

While you may be eager to get your child started with investing, there are actually benefits to the fact that children can’t buy stocks until they turn 18. This age limit can help your child avoid investor mistakes that people commonly make when they’re just getting started, especially if they take this time to learn more about investing in stocks. 

You may want to consider a custodial account that you can manage for your child until they turn 18.

Can You Buy Stocks for Your Children?

The good news is, there are other routes you could possibly take even though your child can’t legally purchase stocks until they’re 18. These alternative investment options may be the solution if you’re looking for a way to get your child started with investing as early as possible.

One option you have is to purchase stocks through your own brokerage account for your child. These stocks aren’t technically in your child’s name, but you’re still able to use them as an investment vehicle for your child. 

You may even want to consider getting input from your child and using these stock purchases to help teach them about investing in stocks. Even if you’re choosing which stocks to invest in and your child isn’t interested in investing in stocks, setting up stocks for them can give them an opportunity to start earning off them.

There are also certain types of accounts you may consider opening which allow you to purchase stocks and make other investments for your child. These investment accounts are managed by you until your child turns 18, but their investments are able to grow even before they’re able to invest on their own. 

Your child would then take control of this account when they reach a specified age, which is typically 18.

For more information about buying stocks for your children and investment accounts that you could potentially use to get your child started with investing early, consider talking to a financial advisor. Each type of investment has pros and cons.

What Is a Custodial Account?

If your child is under the age of 18 and you want to get them started with investing, you may want to consider opening a custodial account to invest in stocks for your child. 

A custodial account allows children under the age of 18 to invest in stocks, but the account is managed by a parent or legal guardian. When your child turns 18, they’re able to take control of the account and make their own decisions. These accounts make it possible for children under the age of 18 to build an investment portfolio.

Keep in mind that custodial accounts are largely controlled by the parent or legal guardian. 

If you want to include your child in the decision-making process, you’ll need to do that on your own. While the child whose name is on the custodial account owns the account in the money when they reach the age of majority, the parent handles the actual management of the account until then. This helps protect your investments and keeps minors from making decisions that could have negative financial consequences.

A custodial account may potentially allow you to start investing and saving before your child turns 18, that way they could potentially have a financial foundation as soon as they’re a legal adult and are able to take control of the account. 

Custodial accounts aren’t just limited to stocks, either. You’re able to open a custodial account for your child under the age of 18 for several different types of investments.

Why Buy Stocks for Your Kids Before They Turn 18

One thing to remember about investing is that it’s a long-term game. While some investments offer greater returns than others, you generally shouldn’t expect to get rich overnight from investing in stocks.

There are two main reasons you may want to consider buying stocks for your child before they turn 18:

Potentially Give Them a Head Start

Buying stocks for your kids before they turn 18 may potentially give them a head start toward financial freedom, it all depends on if those stocks perform well and what is done with payouts. 

Your child has the option of continuing to manage these investments after they take control of the account, or they can cash out the account for education and other expenses.

When they do take over, encourage them to consider seeking advice from a financial advisor or assistance from a stock broker.

Teach Them About Investing Early

Buying stocks for your kids before they turn 18 means you could also potentially teach them about investing at an early age. A custodial account gives you a real-world example you can use to teach your kids about the basics of the stock market, and you may even learn a thing or two as you go. 

This knowledge could be valuable in the future if your children decide to invest, especially if they continue managing the stocks in their custodial account after they turn 18 and take control of the account.

Help Your Child Start Investing & Planning for the Future

In the US, children under the age of 18 aren’t able to legally purchase stocks. As a parent, however, you have the option of buying stocks for your kids using your own brokerage account or a custodial account. If you choose a custodial account, your child gains control of the account when they turn 18. Investing in stocks for your kids early on can help them get a head start on investing and saving.

With the Mint app, you have all the investing tools you need at your fingertips. You can track all the investments you make, including investments you make with custodial accounts, inside the app. Give the Mint app a try today and see how easy it is to keep track of stock investments as well as all your other finances.

Save more, spend smarter, and make your money go further