Research
1. Understand Custodial Accounts
Since most teens under 18 can’t open brokerage accounts independently, a custodial account is the solution. This type of account is set up by a parent or guardian who oversees it until you reach the age of majority (usually 18 or 21, depending on your state).
Popular custodial account providers include:
Fidelity Youth Account
Charles Schwab Custodial Accounts
Vanguard UGMA/UTMA Accounts
E*TRADE Custodial Brokerage
Custodial accounts allow you to buy and sell stocks, ETFs, and mutual funds with your parent or guardian’s help.
Source: Fidelity, "Fidelity Youth Account," www.fidelity.com.
2. Choose a Brokerage
When choosing a brokerage, look for one that offers:
Low Fees: Many platforms, like Fidelity and Robinhood, offer zero-commission trading.
User-Friendly Interface: A platform that’s easy to navigate makes it simpler to learn.
Educational Resources: Companies like Schwab and Fidelity provide tools and videos to help beginners.
Fractional Shares: Some brokerages let you invest as little as $1 in fractional shares, perfect for teens with limited funds.
Source: Charles Schwab, "Why Schwab is Great for Beginners," www.schwab.com.
3. Fund Your Account
Once your custodial account is set up, you’ll need money to start investing. Here are ways to fund your account:
Allowance: Dedicate part of your weekly or monthly allowance to investing.
Part-Time Jobs: If you have a job, consider setting aside a portion of your paycheck.
Gifts or Savings: Use birthday money or savings to jumpstart your investment portfolio.
Source: Broke Millennial, "How to Start Investing in Your Teens and 20s," www.brokemillennial.com.
4. Start Small
For your first investments, focus on:
Index Funds: These are low-risk investments that track major indexes like the S&P 500.
Blue-Chip Stocks: Large, established companies like Apple, Amazon, or Coca-Cola are generally stable investments.
ETFs (Exchange-Traded Funds): ETFs offer a mix of stocks or bonds, spreading risk while providing diversification.
Source: Investopedia, "Blue-Chip Stocks Explained," www.investopedia.com.
5. Learn About Risk and Rewards
Investing involves risk, and it’s essential to understand:
Market Volatility: Stocks can go up or down quickly. Don’t panic during market dips.
Diversification: Spread your investments across sectors to reduce risk.
Long-Term Thinking: Focus on growth over months and years, not just weeks.
Source: Vanguard, "The Importance of Diversification," www.vanguard.com.
6. Track and Adjust
Use your brokerage’s tools to monitor your portfolio. As your interests and the market change, you can adjust your investments. Make it a habit to check in regularly but avoid obsessing over daily fluctuations.
Source: Robinhood, "How to Track Your Portfolio," www.robinhood.com.
7. Learn as You Grow
Investing is a continuous learning process. Here are some resources to expand your knowledge:
Books: The Intelligent Investor by Benjamin Graham or Broke Millennial Takes On Investing by Erin Lowry.
Podcasts: The Investing for Beginners Podcast or Teen Financial Freedom.
Online Courses: Platforms like Coursera or Udemy offer beginner-friendly investment courses.
Source: Teen Financial Freedom, "Podcast Episodes," www.teenfinancialfreedom.com.
Final Thoughts
Creating a stock account as a teen is an incredible way to build financial literacy and start growing your wealth. By starting early, you’ll gain valuable experience and set yourself up for long-term success.
Whether you’re using a custodial account or preparing to open your own once you turn 18, every small step counts. Remember, investing isn’t about quick wins—it’s about consistent learning and growth. Happy investing! 🌟
Citations:
Fidelity. "Fidelity Youth Account." Retrieved from www.fidelity.com.
Charles Schwab. "Why Schwab is Great for Beginners." Retrieved from www.schwab.com.
Broke Millennial. "How to Start Investing in Your Teens and 20s." Retrieved from www.brokemillennial.com.
Investopedia. "Blue-Chip Stocks Explained." Retrieved from www.investopedia.com.
Vanguard. "The Importance of Diversification." Retrieved from www.vanguard.com.
Robinhood. "How to Track Your Portfolio." Retrieved from www.robinhood.com.
Teen Financial Freedom. "Podcast Episodes." Retrieved from www.teenfinancialfreedom.com.
-Giada Verprauskus