Here’s something you probably know: Most teenagers don’t have brokerage accounts.
But it’s not from lack of interest.
A surprisingly vast majority of teens understand the virtue of investing. According to Fidelity’s 2023 Teens and Money Study, 90% of teenagers who don’t already invest say they plan on doing so at some point—and 75% plan on starting before they graduate college!
However, just 23% from that same study have actually started investing. Indeed, the average age of a starting investor is in their early 30s. So it’s clear that most people wait until they’re well into adulthood before starting to invest in stocks and funds on their own. And besides, teenagers can’t open their own brokerage account until age 18.
But teens do have options—and given the massive investing edge most teenagers have (but don’t realize), they should consider taking the plunge. In short: The longer you put money to work in the stock market, generally speaking, the more wealth you can accumulate. On top of that, the earlier you learn how to invest, the quicker your financial literacy will improve—leading to better decision-making when you’re saving and investing much larger sums.
My advice: Don’t make your teen figure it out for themselves in their 30s. You should get them started today … and I can help.
Read on as I highlight the best brokerage accounts for teenagers, explain how these accounts work, and answer a few common questions that teens and their parents typically have regarding investing. By the end of this article, you should have everything you need to start your teen on their investing journey.
Teens’ Big Investing Advantage: Compounding Returns
Here’s something I wish I had learned as a teen: The longer you have money in the market, the longer you can benefit from the power of compounding.
Compounding is when you invest a sum of money, make money from that investment, and reinvest the earnings to make even more money. Given enough time, even small amounts of cash can grow into large sums if you keep reinvesting those earnings.
Let’s say you want to invest $1,000 toward your retirement, which most people reach at age 65. When you do that makes a world of difference. Just look at this table below showing just how much more that money can grow the earlier you put it to work:
That’s right: If a teen invests $1,000 at age 15, and never adds another dime, that money could grow by well more than 100x by the time they retire. (So just imagine how much more money they could retire with if they invested well for the rest of their life!)
Investing for Teens: 2 Types of Brokerage Accounts
A brokerage account is the most basic type of investment account. It has no tax advantages, unlike a 401(k) or individual retirement account (IRA). But it allows you to invest in a wide array of assets—typically stocks, exchange-traded funds (ETFs), mutual funds, and more—and there’s no cap on how much you can invest.
There’s just one little problem: Minors can’t open a standard brokerage account for themselves.
But again, I emphasize standard. Teens can still invest (with the help of a trusted adult) through one of two other types of brokerage account:
1. Joint Brokerage Account
A joint brokerage account is owned by two or more people—say, a husband and wife. However, a parent can also open a joint account with their teen. Both account holders have ownership of the assets within the account, and both have a say on investment decisions.
If the main goal of an account is to teach a teen about investing, a joint brokerage account makes a lot of sense. I have to warn you, there are risks—namely, you might not want your teen to be able to buy or sell investments whenever they want—but certain youth accounts provide guardrails to protect against this.
2. Custodial Brokerage Account
A custodial brokerage account (and the assets within) is owned by a minor beneficiary, but an adult helps open the account and acts as a custodian. Frequently, a custodian is a parent, and the beneficiary is their child.
As long as the child is a minor, the custodian determines how account funds are invested and whether withdrawals are made. Withdrawn money must be used to benefit the minor. Once the beneficiary reaches the age of majority in their state (typically 18 or 21), they gain control of the custodial account.
(Editor’s Note: There are two types of custodial accounts: Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA). In short, a UTMA account can hold a few more assets than UGMA accounts, but you can learn more with our UGMA/UTMA comparison.)
While minors don’t technically have any authority over how the account’s money is invested, it’s still a worthwhile account type for teenagers: The money is still invested on the teen’s behalf, and parents can help their teen learn by involving them in investment decisions.
Related: 5 Best Under-18 Investment Accounts
Brokerage Accounts for Teens—Our Top Picks
Open a Fidelity Youth™ Account for your teen, and Fidelity will drop $50 into their account. Get $100 for yourself when you open a new Fidelity account and fund with $50¹.
$2.95/mo. for one child. $4.95/mo. for families with 2+ children.
Best Brokerage Accounts for Teens
1. Fidelity Youth™ Account (Best Investment Account for Teens)
- Available: Sign up here
- Price: No account fees, no account minimum, no trading commissions*
- Platforms: Web, mobile app (Apple iOS, Android)
- Promotion: Teens get $501 on Fidelity® when they download the Fidelity Youth™ app and activate their Youth Account; parents get $100 when they fund a new account
Is your teen interested in jumpstarting their financial future? Do you want them to build smart money habits along the way?
Of course you do! Learning early about saving, spending and investing can pay off big when you start on the right foot. And one tool that can help your teen get that jump is the Fidelity Youth™ Account—an account owned by teens 13 to 17 that’s designed to help them start their money journey. They can start investing by buying most U.S. stocks, exchange-traded funds (ETFs), and Fidelity mutual funds for as little as $1!⁴
Your teen will also get a free debit card with no subscription fees, no account fees³, no minimum balances, and no domestic ATM fees⁵. And they can use this free debit card for teens to manage their cash and spend it whenever they need.
And as for building smart money habits? You and your teen can access your account through the Fidelity Youth™ app, which has a dedicated Learn tab packed with materials developed specifically to help teens develop good financial habits. Not only will Fidelity’s interactive lessons, videos, articles, tools, and calculators accelerate their learning—but for every level they complete, reward dollars will be deposited into their account to use however they want.
Controls parents want and need
A parent or guardian must have or open a brokerage account with Fidelity® to open a Fidelity Youth™ Account. For new Fidelity® customers, opening an account is easy, and there are no minimums and no account fees.
Parents and guardians have plenty of tools they can use to monitor their teen’s activity: They have online account access, can follow monthly statements and trade confirmations, and can view debit card transactions made in the account.
To make it even easier, you can set up alerts to notify you of trades, transactions, and cash management activity, keeping you firmly in the loop on actions your teen takes across the Fidelity Youth™ Account’s suite of products.
If your teen has an interest in learning about investing and taking their first steps toward building their financial journey, you should consider downloading the Fidelity Youth™ app and opening a Fidelity Youth™ Account. The account comes custom-built for their needs, which will help them become financially independent and start investing for their future.
Read more in our Fidelity Youth™ Account review.
2. E*Trade (Best Joint Brokerage Account)
- Available: Sign up here
- Price: Free (no monthly fees)
E*Trade has long been seen as a leading stock investment app for retail investors. It allows you to invest in a wide array of assets, and it provides educational resources that will help you with investment research, portfolio analysis, and building a diversified set of holdings.
E*Trade, like most of the best stock investing apps, offers zero-commission stock, ETF, and options trading. It also has a leg up on some platforms by offering $0-commission mutual fund trading. Options still incur a 50- to 65-cent contract fee, however.
E*Trade has two platforms—E*Trade and Power E*Trade—both of which are free, and both of which have web and mobile versions.
The “basic” E*Trade web platform might be more suitable for beginning-to-intermediate traders and investors, but that doesn’t mean it’s short on features. It includes everything you need to keep up to date on your portfolio, including real-time quotes, charts, market commentary, and stock news. The latter includes free access to Thomson Reuters and TipRanks research. Meanwhile, you’ll have ample tools at your disposal, including stock, mutual fund, bond, and ETF screeners; trade optimizers; backtesters; and more.
E*Trade also touts its educational resources, which includes articles, videos, and classes, as well as monthly webinars and live events. But I will note that its educational content is difficult to sort through.
Visit E*Trade to learn more or sign up today.
3. EarlyBird (Custodial Account With Personal Touches)
- Available: Sign up here
- Price: $2.95/mo. for one child, $4.95/mo. for families with 2+ children
EarlyBird is a mobile app that allows parents and guardians to set up a Uniform Gifts to Minors Act (UGMA) custodial account, where they can quickly start investing for their children. It also allows friends and family to easily gift money to a child in EarlyBird’s investing accounts for children.
EarlyBird allows you to choose from five strategic ETF-only portfolios, with investing goals ranging from conservative to aggressive, based on your stated risk tolerance and overall investor profile. This removes the complexity of conducting your own investing research and making individual stock and fund picks.
Do family and friends want to provide a gift, but think money is too impersonal? With EarlyBird, they can record a video to go along with their financial contribution, personalizing these moments which last a lifetime. And if you’d like to give but the recipient doesn’t have an EarlyBird account, you can text them a link from the app to the recipient’s phone number.
EarlyBird also has a “Moments” feature that allows parents to begin to save and share special milestones and memories alongside their investments. Parents can add a “Moment” to their child’s timeline at any time by uploading photos or videos with notes to capture magical moments as their child grows—no contributions necessary (but naturally encouraged). You can choose to automatically share Moments with anyone else who has invested in your child on EarlyBird, but each Moment also has its own unique link that you can share with people outside of the app.
An EarlyBird investment account costs $2.95 per month for one child, or $4.95 per month for multiple children. When parents or guardians set up a new custodial investment account through EarlyBird, they must start with a $15/month recurring contribution minimum. However, you can change that recurring contribution amount higher or lower as your budget allows or necessitates.
Consider opening an EarlyBird account today and receive $15 to get you started after opening your account.
Also, EarlyBird currently is in the “early access” stages of a cryptocurrency offering. Through a partnership with Gemini, one of the world’s largest and most secure crypto exchanges, EarlyBird also offers a crypto wallet that can hold Ethereum and Bitcoin when you sign up for an investment account. You will receive $25 when you open your wallet to invest in Ethereum or Bitcoin, and you can also earn a $50 referral bonus, which you can invest in the same token of choice, when you refer three other families.
4. Acorns (Invest With Round-Ups)
- Available: Sign up here
- Best for: Investors looking for simple, automated investing
Acorns is an investing app geared toward minors, young adults and millennials by offering “Round-Ups”: The app rounds up purchases made on linked debit and credit cards to the nearest dollar, investing the difference on your behalf.
For example, if you purchase a coffee for $2.60 on a linked credit card, Acorns automatically rounds this charge up to $3.00 and puts the 40-cent difference aside. Once those Round-Ups reach at least $5, they can be transferred to your Acorns account to be invested.
The Acorns investment offering itself is a simple, automated platform that uses pre-built portfolios of ETFs to keep investors exposed to stocks and bonds. While it doesn’t have much to offer intermediate investors who want variety in their portfolios, Acorns’ basic approach makes it one of the best investment apps for beginners.
Acorns has the following subscription options:
- Acorns Personal ($3 per month): Includes an Acorns Invest investment account, as well as Acorns Later for tax-advantaged investment options such as Roth IRAs. Also includes Acorns Checking, a bank account that has no account fees, lets you withdraw fee-free from more than 55,000 ATMs nationwide, and Smart Deposit, which allows you to automatically invest a bit of each paycheck into your Acorns accounts.
- Acorns Personal Plus ($5 per month): Everything in Acorns Personal (Acorns Invest, Later, and Checking), plus Premium Education, which are live onboarding sessions covering account setup, Round-Ups, setting up recurring investments, and more; Emergency Fund; and a 25% bonus on Acorns Earn rewards (up to $200 per month).
- Acorns Premium ($9 per month): Everything in Acorns Personal Plus, plus Acorns Early, which allows you to open a custodial investment account for your child so you can begin investing for them while they’re a minor; custom portfolios that allow you to hold individual stocks; live Q&As with financial experts; a 50% match on Acorns Earn rewards (up to $200 per month); $10,000 in life insurance; even the ability to set up a will for free.
Learn more in our Acorns review.
5. Copper Card (Best for Kid Independence)
- Available: Sign up here
- Price: Variable pricing on Copper and Copper + Invest plans
Copper Banking was founded on the belief that kids and teens should have equal access to financial education and should be empowered to learn by doing. Now, the company is on a mission to help children gain real-world experience by giving them access to their money in a way that traditional banks can’t.
The Copper app and debit card teaches your child how to make smart financial decisions by creating a platform where parents and their kids can connect. With the Copper app, you get easy snapshots of your accounts. And with the Copper Debit Card, it’s easy to shop in-store or online, including with Apple Pay or Google Pay.
Plus, users get exclusive access to engaging advice curated by a team of financial literacy experts who provide tips on how to take control of their financial future.
Copper Banking features
- Send/Request: Kids and parents can easily send and receive money all at the touch of a button.
- Spend: Spend using Apple or Google Pay, or using the Copper Debit Card.
- Withdraw: Access your money from more than 55,000 fee-free ATMs.
- Monitor: Get a snapshot of all your child’s spending in an easy-to-read dashboard.
- Save: Gain quick snapshots of your kid’s savings and helpful tips on how to save even more. Set up savings buckets and save for the things that you want.
- Learn: With the help of Copper’s team of financial literacy experts, gain bite-sized tips on how you can maximize your money and prepare yourself for your financial future.
The basic Copper account includes the above banking features. With Copper + Invest, your child also gets access to automatically curated smart portfolios built with their preferences in mind. Your child is given a questionnaire that helps Copper determine a portfolio based on their age, income, net worth, investment objective(s) and investment horizon. Copper then recommends one of three ETF portfolios—Moderately Aggressive, Aggressive, and Extra Aggressive—made up of thousands of stocks. Parents can review the portfolio to ensure it matches with not just your child’s preferences, but your family’s. (Portfolios can be changed later on by accessing the Support chat.)
Your child can begin investing for as little as $1, then add more contributions down the road. Copper will automatically rebalance the portfolio as needed to make sure it always keeps up with your child’s investment preferences.
Copper is available to kids 6 years and older.
Read more in our Copper Banking review.
Other Types of Investment Accounts
Teens don’t necessarily have to start investing through the brokerage accounts mentioned above. Several other accounts provide access to investments, though they come with their own unique rules, perks, and limitations.
1. Custodial (IRA)
Custodial IRAs—which can be traditional IRAs or Roth IRAs—function similarly to custodial brokerage accounts in that an adult custodian sets the account up for the minor child; the child is the owner, but an adult manages the account; and the child assumes control of the account when they reach the age of majority. IRAs function mostly just like a brokerage account, and typically offer the same investment selections, but they have different contribution and tax rules.
With a traditional IRA, money is placed into the account on a “pre-tax” basis. So if you fund the account with earnings that have already been taxed, you can deduct those contributions from your taxes. Money in the account grows tax-free, then you pay taxes on any withdrawals. You’re also charged a 10% penalty on any withdrawals before age 59½, with some exceptions.
With a Roth IRA, you contribute “after-tax” money, so you don’t get any deductions. But that money grows tax-free in the account, and you don’t pay taxes when it’s time to withdraw. You can withdraw contributions whenever you want without penalty, and you can take out earnings without penalty once you’re 59½ as long as the account has been open for at least five years.
Considering a teen’s tax rate is almost sure to be lower when they’re young than when they retire, Roth IRAs are usually the better choice for a teen.
Both IRAs and Roth IRAs have a $6,500 annual contribution limit in 2023; also contributions to a custodial IRA or custodial Roth IRA can’t exceed the teenager’s earned income that year.
2. 529 Plans
Parents who want to save for their teen’s college and other educational costs should strongly consider 529 plans. These investment accounts are operated by individual states, and while they can offer a range of asset selections, they can also be limited—say, just a few funds.
Parents contribute after-tax dollars to a 529 plan, and the money grows tax-deferred until it’s ready to be withdrawn. 529s have no annual contribution limits.
Distributions from 529 plans are tax- and penalty-free as long as they’re used on qualified education expenses, which include tuition, fees, books, supplies, equipment, room and board, and other related expenses for college, vocational school, and other post-secondary educational institutions. They can also be used on K-12 tuition. However, earnings withdrawn and used for any other purpose are taxed and face a 10% penalty.
Leftover funds can be transferred to a family member’s 529 account or ABLE account (a savings account for people with disabilities). However, starting in 2024, a beneficiary can also transfer up to $35,000 of leftover money in a 529 plan into a Roth IRA in his or her name. Any rollover is subject to annual Roth IRA contribution limits, and the 529 account must have been open for at least 15 years.
3. Coverdell Education Savings Accounts (ESAs)
Similar to 529 plans, Coverdell education savings accounts (ESAs) are used to invest for a minor’s education expenses, but the minor doesn’t own the account, nor do they make investment decisions.
Just like a 529 plan, money is invested and distributions are tax-free if used for qualified education expenses. Funds aren’t limited to higher education, either; they can be used for primary and secondary schools as well.
ESAs have several limiting factors, however. For instance, families can only contribute to an ESA if their modified adjusted gross income (MAGI) is under the limit set for that tax year.
“They’re limited to annual contributions of just $2,000 per beneficiary. So immediately, you’re handcuffed,” adds Mike Ramirez, Manager of Financial Planning and Certified College Planning Specialist at EP Wealth Advisors’ San Diego office. “Also, once the beneficiary turns 30, that fund has to be fully distributed. So if your student didn’t go to school, didn’t use the funds, then those funds have to be distributed, so they’ll be subject to tax and a 10% penalty. You can’t get around it like you can with a 529.”
How Do Investment Accounts for Teens Affect Financial Aid?
One consideration when you’re determining what kind of investment account your teen should have is how it will affect financial aid. Specifically, the Free Application for Federal Student Aid (FAFSA) weighs some types of savings differently than others when it comes to the Expected Family Contribution (EFC)—a number that determines student financial aid eligibility—so here’s what you should know:
Money in any retirement account doesn’t affect financial aid eligibility, so custodial IRA savings won’t affect your FAFSA. However, if you withdraw earnings from a custodial IRA, that money counts as taxable income, which could negatively affect eligibility.
A 529 plan affects financial aid, but only slightly. 529 plans will virtually always be a parental asset; only up to 5.64% of a parental asset’s value is considered when calculating the EFC.
A Coverdell ESA also affects financial aid, but minimally. Like a 529 plan, a Coverdell ESA is usually owned by the parent. Thus, only 5.64% of ESA assets are taken into account when calculating the EFC.
Joint Brokerage Account
Joint brokerage accounts can have a fair-sized impact on financial aid. With a joint brokerage account, 50% of the account’s value is a parental asset and counted at the 5.64% rate … but the other 50% is considered a student asset and counted at the 20% rate.
Custodial Brokerage Account
Custodial brokerage accounts that aren’t retirement accounts can have a significant impact on financial aid because the assets belong to the teen but don’t have the protections of retirement accounts. Federal financial aid formulas consider 20% of the money in a custodial account available for college costs.
In general, brokerage accounts with low funds shouldn’t make a huge difference, but accounts with substantial funds have more effect on aid.
Do Teens Pay Taxes on Earnings Made in Their Accounts?
Depending on how much money from interest, dividends, and other unearned income a beneficiary earned in a custodial account, the teen might be subject to the “kiddie tax.”
As of 2023, any beneficiary who is under age 19 (or under age 24 and a full-time student) doesn’t have to pay taxes on the first $1,250 of unearned income. The next $1,250 is taxed at the teen’s marginal tax rate. Any unearned income over $2,500 is taxed at the parents’ rate.
Do Parents Pay Gift Taxes for Contributions Made to Their Teens’ Accounts?
For a joint brokerage account, if only the parent contributes money, half of the account value could be counted as a taxable gift. For a custodial account, the full amount is considered a gift because the money immediately becomes property of the child. However, even if the gift tax rules are triggered, no tax would be due unless the parent expects to surpass the lifetime gift tax exemption limit. For 2023, that limit is $12.92 million. The gift tax rules can be tricky, so consider speaking with a tax professional about any gift tax implications if you want to open a joint brokerage account.
Which Brokerage Account for Teens is Best?
Whether a custodial account or joint brokerage account is better for your teen largely depends on how much control you want the teen to have over the account and who you want to own the assets.
With a custodial account, all assets belong to the teen, but the adult controls the investments and withdrawal decisions. In a joint brokerage account, both owners own the assets and can make investment choices; thus, the teen can have more control over a joint account than they can with a custodial account.
The Fidelity account mentioned above is a great example of how you can defray some risk. The Fidelity Youth™ Account allows you to set up alerts to notify you not just of trades, but also transactions and any cash management activity within the account.
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Terms and Conditions for Fidelity Youth™ Account
The Fidelity Youth™ Account can only be opened by a parent/guardian. Account eligibility limited to teens aged 13-17.
* $0.00 commission applies to online U.S. equity trades and exchange-traded funds (ETFs) in a Fidelity retail account only for Fidelity Brokerage Services LLC retail clients. Sell orders are subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal). Other exclusions and conditions may apply. See Fidelity.com/commissions for details. Employee equity compensation transactions and accounts managed by advisors or intermediaries through Fidelity Institutional® are subject to different commission schedules.
¹ Limited Time Offer. Terms Apply. Before opening a Fidelity Youth™ Account, you should carefully read the account agreement and ensure that you fully understand your responsibilities to monitor and supervise your teen’s activity in the account.
² The Fidelity Youth™ app is free to download. Fees associated with your account positions or transacting in your account apply.
³ Zero account minimums and zero account fees apply to retail brokerage accounts only. Expenses charged by investments (e.g., funds, managed accounts, and certain HSAs) and commissions, interest charges, or other expenses for transactions may still apply. See Fidelity.com/commissions for further details.
⁴ Fractional share quantities can be entered out to 3 decimal places (.001) as long as the value of the order is at least $0.01. Dollar-based trades can be entered out to 2 decimal places (e.g. $250.00).
⁵ Your Youth Account will automatically be reimbursed for all ATM fees charged by other institutions while using the Fidelity® Debit Card at any ATM displaying the Visa®, Plus®, or Star® logos. The reimbursement will be credited to the account the same day the ATM fee is debited. Please note, for foreign transactions, there may be a 1% fee included in the amount charged to your account. The Fidelity® Debit Card is issued by PNC Bank, N.A., and the debit card program is administered by BNY Mellon Investment Servicing Trust Company. These entities are not affiliated with each other, and Fidelity is not affiliated with PNC Bank or BNY Mellon. Visa is a registered trademark of Visa International Service Association, and is used by PNC Bank pursuant to a license from Visa U.S.A. Inc.
⁶ Venmo is a service of PayPal, Inc. Fidelity Investments and PayPal are independent entities and are not legally affiliated. Use a Venmo or PayPal account may be subject to their terms and conditions, including age requirements.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917