You can invest in stocks before you turn 18, but not in your own name

A minor cannot open a brokerage account or buy stocks directly. You need to be at least 18 years old to sign a legal contract with a brokerage firm, and that contract is what lets you trade. However, there are three real ways to own stocks before you turn 18: through a custodial account opened by a parent or guardian, through a Uniform Transfers to Minors Act (UTMA) account, or by owning shares in a mutual fund or exchange-traded fund (ETF) that a parent holds.

The most common route is a custodial brokerage account, sometimes called a Uniform Gifts to Minors Act (UGMA) account depending on your state. An adult opens the account in your name, but they control it until you reach the age of majority — usually 18 or 21, depending on your state and the account type. You can make investment decisions and learn how markets work, but the adult has legal authority over the account and can see all transactions.

Key Takeaways

  • A parent or guardian must open and control a custodial account in your name; you cannot open a brokerage account yourself until you turn 18.
  • UGMA and UTMA accounts are the two legal structures used for custodial accounts, and which one is available depends on your state.
  • Money deposited into a custodial account becomes your property for tax purposes, which means you may owe taxes on dividends and gains even though an adult controls the account.
  • When you reach the age of majority, the account transfers to your full control, and the custodian can no longer make decisions or access the funds.
  • Some brokerages offer educational accounts or paper trading platforms where you can practice buying and selling stocks with fake money before investing real money.

How custodial accounts work and what they cost

When a parent or guardian opens a custodial account at a brokerage like Fidelity, Charles Schwab, or E-Trade, they provide their own identification and banking information. The account is registered in your name as the minor, but the adult is listed as the custodian. The adult deposits money into the account, and you decide which stocks or funds to buy — or the adult can make those decisions for you.

Most major brokerages do not charge monthly fees for custodial accounts, though some charge per trade or have minimum deposit amounts. Check the specific brokerage's fee structure before opening an account, because fees vary. The account itself is free to maintain; you only pay when you buy or sell securities, and those costs depend on whether the brokerage charges commissions (many do not for stock trades) and whether you are buying individual stocks or funds.

The adult custodian can add money to the account at any time, and there are annual gift tax limits — currently $18,000 per person per year — but most families do not reach that threshold. The key restriction is that once money goes into a custodial account, it is legally yours, and the custodian cannot take it back for their own use.

UGMA versus UTMA accounts: which one you can use

Both UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) accounts are custodial structures, but they differ in what can be held inside them and when control transfers to you. UGMA accounts hold only cash, securities, and insurance contracts. UTMA accounts can hold those items plus real estate, artwork, and other property. Not all states have adopted UTMA; some still use only UGMA, and a few allow both.

For stock investing, the difference between UGMA and UTMA is usually not significant — both can hold stocks, mutual funds, and ETFs. The more important difference is the age at which the account transfers to your control. With UGMA, that age is typically 18 or 21. With UTMA, it can be as late as 25, depending on your state. Your parent or guardian should check your state's law or ask the brokerage which account type is available in your state.

Tax consequences of owning stocks in a custodial account

Money in a custodial account is legally yours, which means you are responsible for taxes on any gains or dividends, even though an adult controls the account. If you receive dividends or sell a stock for a profit, you may owe income tax on that money. The brokerage will send a tax form (usually a 1099) to you and the IRS at the end of the year.

There is a tax break for minors: the first portion of investment income is taxed at your rate (usually lower than an adult's), and some investment income may not be taxed at all if it falls below a certain threshold. In 2024, a minor can earn up to roughly $1,450 in unearned income before owing federal tax, though this amount changes yearly. Above that, the income is taxed, and above roughly $2,900, it may be taxed at your parent's rate instead of yours — a rule called the "kiddie tax."

You or your parent will need to file a tax return reporting this income. Many families use a tax professional or tax software to handle this, because the rules are specific and mistakes can trigger an audit. Ask your parent to discuss the tax side with a tax preparer before opening the account, so there are no surprises.

What happens when you turn 18 or reach the age of majority

When you reach the age of majority in your state — usually 18, but sometimes 21 or 25 depending on the account type and state — the custodian's authority ends. The account becomes fully yours. The custodian cannot make decisions, cannot withdraw money, and cannot see the account details unless you give them permission. You can keep the account open at the same brokerage, transfer it elsewhere, or close it entirely.

This transfer is automatic; you do not need to do anything special. The brokerage will notify you when the transition occurs. At that point, you can buy and sell stocks on your own, change your investment strategy, or withdraw the money. If you have made gains in the account, those gains remain in the account and are still yours — the custodian does not take a cut.

Learning to invest before you have your own account

If you want to practice investing before your parent opens a custodial account, many brokerages offer paper trading or educational accounts. Paper trading lets you buy and sell stocks using fake money, so you can learn how markets work without risking real money. Platforms like Fidelity, Charles Schwab, and Investopedia offer free paper trading tools.

Some brokerages also offer educational resources specifically for teens — videos, articles, and quizzes about how stocks work, how to read a stock chart, and how to build a portfolio. Starting with these tools can help you understand what you are doing before you ask a parent to open a real account. You can also read books about investing for beginners or watch YouTube channels that explain stock market basics.

Alternatives if a parent cannot open an account for you

If a parent or guardian is not available or willing to open a custodial account, you have limited options. Some credit unions and banks offer teen savings accounts with investment features, though these are usually limited to bonds or mutual funds rather than individual stocks. A few brokerages have experimented with teen accounts that require parental consent but give the minor more control, though these are not yet widely available.

Another option is to ask a grandparent, aunt, uncle, or other trusted adult to open the account for you. The adult does not have to be your parent — any adult can serve as custodian. If you go this route, make sure the adult understands that they are responsible for the account until you reach the age of majority, and that the money is legally yours even though they control it.

Frequently Asked Questions

Can I buy stocks on my own if I lie about my age?

No. Brokerages verify identity and age before opening any account. Lying about your age is fraud, and the brokerage will close the account if they discover the deception. You will lose access to the money, and the brokerage may report the fraud. It is not worth the risk.

Do I have to tell my parents if I want to invest in stocks?

Yes, because a parent or guardian must open the account for you. You cannot open one yourself. If you are interested in investing, talk to your parent about opening a custodial account. If your parent is not interested, you can ask another trusted adult, but someone has to be involved.

What if I want to invest money I earned from a job?

Money you earned from a job is still yours, but you still need an adult to open the custodial account. The adult deposits your earnings into the account, and you own the account and any stocks you buy with that money. The adult is the custodian, not the owner.

Can I lose all my money investing in stocks as a minor?

Yes. Stock prices go up and down, and you can lose money if you buy a stock and its price falls. This is true whether you are 16 or 60. A custodial account does not protect you from market losses. Start by investing small amounts and learning how markets work before putting in larger sums.

What happens to my custodial account if my parent dies?

The account is still yours. A new custodian (usually named in your parent's will) takes over management of the account until you reach the age of majority. If no custodian is named, a court may appoint one. The money does not go to the estate or disappear — it remains in the account for you.