Can you invest in stocks under 18? What you need to know

Can you invest in stocks under 18? What you need to know

It’s more important than ever to ensure teens have a solid foundation in financial literacy, including learning about investing and financial planning with parental supervision. While kids under 18 usually can’t open their own brokerage accounts, there are several options for them to invest in stocks, typically through a custodial account or something similar. 

Why start investing early?

Many people don’t think about investing until later in life, when they start retirement planning.  So why should kids and teens learn about investing early? There are several potential benefits:

• Compound interest: Compound interest means your earnings can earn even more over time. The longer your money stays invested, the more those returns compound, or build on themselves, helping your balance grow at a faster pace. For example, a teen investing at 15 compared with someone investing at 35 has an extra 20 years for their money to earn compound interest. See the power of compound interest with this calculator. 

• Real-world skills: Many kids don’t learn financial literacy in school, so their first real-world experience may be as adults, when financial mistakes can be far more costly. Hands-on investing experience enables them to learn about the stock market, saving, budgeting, risk management, and many other financial concepts that will be invaluable as they mature.

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• Gen Z trends: According to a Charles Schwab report, Gen Zers are starting to invest earlier than older generations. Teens may express interest in investing early, so providing them with the proper tools and education can help them do so more thoughtfully and safely. Plus, they can still be ahead of the average investor by starting early. 

Legal ways teens can invest

There are several ways for teens to invest:

Custodial accounts (UGMA/UTMA)

Parents can set up a custodial account for their child. The parent controls the account until the child becomes an adult (typically 18 or 21, depending on state laws), but the money in the account can only be used for the child's benefit. Even though the child doesn’t technically own the account, it can be a great way to involve them in investment decisions as they watch their own money grow. 

Learn more about custodial accounts. 

Custodial Roth IRA

Similar to a UGMA/UTMA, parents can open a Roth IRA as the custodian or owner of the account for their child under 18. There is no age limit for a Custodial Roth IRA; however, the child must have earned income to contribute to the account. Once the child becomes an adult, they can convert the account to their own Roth IRA and continue to invest on their own. This money would continue to grow tax-free and can be withdrawn tax-free after age 59 ½. 

529 plans

If your child plans to attend college, a 529 plan can be an excellent way for them to get exposure to investing while also saving for college. Investments grow tax-free, and withdrawals aren’t taxed as long as the funds are used for qualified education purposes. While kids can’t open a 529 plan themselves (it has to be set up by an adult, usually a parent or guardian), they can still contribute to their own 529 account. 

Learn more about 529 plans. 

Greenlight

In addition to these options, you can give kids more hands-on experience and guidance with educational tools like Greenlight’s investing app for kids and teens©. Kids can explore stocks and ETFs and propose trades for as little as $1 to their parents. Every trade is subject to parental approval before it’s processed, so you can discuss the risks and rewards together and help them make informed decisions. With built-in safety features*, educational tools, and no hidden fees, it’s a collaborative and low-risk way to introduce kids to investing fundamentals. 

How to get started

Here are a few steps you and your teen can take to get started:

• Learn the basics. Brush up on investing knowledge together to expand their financial literacy and help them prepare for the world of investing. Kids can learn to invest by playing the Level Up™ financial literacy game and exploring Greenlight’s Learning Center. 

• Choose the right account(s). Assess your goals, compare the different account types, and decide which one(s) make the most sense to start with. 

• Open and fund it. Once you decide, you can open the account and transfer money into it.

• Select investments. After transferring money into the account, you’ll need to decide which investments to purchase. Do your research together. If you’re just starting, start small and grow as you get more comfortable. 

• Review and grow. Set aside time to meet with your teen at least once a month to review their investments, discuss any lessons learned, and plan any investment decisions for the upcoming month. 

Frequently asked questions

Is it legal to invest under 18?

No, teens under 18 can’t legally open a brokerage account. However, with a custodial account, a joint account, or a family-managed platform like Greenlight, they can learn about and practice with the help of a parent or guardian. 

What happens to the account when I turn 18?

For custodial accounts, ownership typically transfers to the teen at age 18 or 21, depending on your state. With Greenlight, families have more control over their finances. Parents retain oversight, but they can start giving teens more responsibility when they’re ready. 

Do minors have to pay taxes on their investments?

Sometimes. It depends on how much money the investments earn and the type of account they’re in. In many cases, if a minor earns a certain amount from things like dividends or selling stocks, it could be taxed at the parent’s tax rate, known as the “kiddie tax.” Even if the account is in the child’s name, the IRS may still treat some of that income as taxable. If you’re unsure, it’s always a good idea to check with a tax professional.

Can I pick my own stocks or ETFs?

Yes, on platforms like Greenlight, teens can research and suggest trades right from the app. Parents approve or deny each transaction, giving kids the freedom to learn while staying safe. You can also invest in fractional shares to start small.

Are schools teaching this kind of thing?

Some schools offer personal finance courses, but most don’t go deep into investing. That’s why apps like Greenlight include educational resources and real-time feedback, so you can learn the pros and cons of investing even if your classroom doesn’t cover it.

Start early

If your child or teen starts showing interest in investing, it’s an excellent opportunity to start the conversation and begin building good money habits early. Greenlight’s debit card for kids and education platform can provide invaluable resources to empower your family to tackle the investing journey together. 

Want to raise savvy investors? With Greenlight, kids get real-world experience under your guidance. Try Greenlight, one month, risk-free†.

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**2025 Greenlight Investment Advisors, LLC, an SEC Registered Investment Advisor provides investment advisory services to its clients. Investing involves risk and may include the loss of principal. Investments are not FDIC-insured, are not a deposit, and may lose value.