Can Someone Under 18 Trade Stocks? A Practical Guide

Can someone under 18 trade stocks? Yes — minors can gain market exposure via custodial accounts, teen/youth brokerages, custodial retirement accounts, or supervised alternatives. This guide explain...

2026-01-03 02:11:00

By Emma Shah

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Can Someone Under 18 Trade Stocks?

Can someone under 18 trade stocks? Yes — but usually not in a standard adult brokerage account. Minors commonly access the market through custodial accounts (UGMA/UTMA in the U.S.), teen or youth brokerage accounts, custodial retirement accounts (e.g., Roth IRA for minors with earned income), trusts or joint arrangements, and simulated/paper-trading platforms. Rules and available features vary by country, state, and broker, so parents and guardians should check local law and broker terms before opening accounts.

As of 2026-01-21, according to public brokerage FAQs and consumer guides, custodial and teen accounts remain the primary legal paths for under-18s to invest; app-based youth platforms have expanded features but often restrict high-risk products.

Overview and Key Concepts

Before you explore specific accounts, it helps to understand three core ideas: legal capacity to contract, what “trading” versus “investing” means in practice for minors, and the difference between owning securities versus having market exposure.

Legal capacity to contract: In many jurisdictions, minors (commonly under 18) lack full legal capacity to enter enforceable contracts. That’s why brokers require an adult custodian or guardian on record for accounts holding real securities.
Trading vs investing: “Trading” often implies frequent buying and selling, use of margin, options, or short-selling. “Investing” typically refers to a longer-term approach (buy-and-hold), including index funds and dividend stocks. For minors, investing is usually safer and more accessible than active trading.
Ownership vs exposure: A custodial account legally holds assets for a minor — the minor is the beneficiary and eventual owner. Parent-controlled accounts (or accounts where a parent must approve trades) provide exposure but differ legally and in control rights.

Understanding these concepts helps parents and teens choose the right setup and avoid legal or tax surprises.

Legal and Regulatory Framework

Age-based restrictions exist because contracts and financial agreements require legal capacity. Financial regulators set rules and oversee brokers to protect consumers, especially vulnerable groups like minors.

Why age limits exist: Minors’ limited contractual capacity protects both the minor and third parties from unenforceable agreements. Brokers rely on adults to accept account agreements and assume certain responsibilities.
Major regulators to know (examples): In the United States, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) set and enforce many broker-dealer rules. In the United Kingdom, the Financial Conduct Authority (FCA) provides oversight. Other countries have equivalent regulators.
Typical age thresholds: Many brokers require account holders to be adults (often 18). Some jurisdictions set adulthood at 18, others at 16 or 21 for specific rights. Even when a teen is allowed to hold a custodial or teen account, many product features (margin, certain derivatives, crypto trading) are restricted until legal majority.

Rules vary by country and by broker. Always review local law and the broker’s account agreements.

Jurisdictional Differences (brief)

Regulation and account types differ across countries. For example, the U.S. commonly uses custodial accounts under UGMA/UTMA rules; other countries rely on minor trust arrangements or specific youth investment products. Tax treatment, age of majority, and permitted securities are set locally. Check local statutes and the broker’s terms for exact requirements.

Account Types That Let Minors Access the Market

Below are the principal account types that allow minors to gain equity exposure. Each has distinct control, tax, and transfer rules.

Custodial Accounts (UGMA / UTMA in the U.S.)

Structure: A custodian (typically a parent or guardian) opens an account for the benefit of a minor. The custodian manages investments until the minor reaches the age of majority specified by law.
Control and ownership: Legally, the assets belong to the minor; the custodian controls the account but must act in the child’s best interest. Transfers to the beneficiary are typically irrevocable.
Transfer of ownership: When the minor reaches the legal age (varies by state and country), the account’s assets transfer to the beneficiary, who then controls the funds.
Common uses: Long-term savings, gifting, early investment education, and saving for education or other goals.

Custodial Roth IRA / Retirement Accounts for Minors

Eligibility: Minors can contribute to a custodial Roth IRA if they have earned income (from a job or self-employment). Contributions are limited to earned income and annual IRA limits.
Tax advantages: Roth IRAs offer tax-free growth and tax-free qualified withdrawals, which can be powerful when started early.
Custodial setup: A custodian opens the custodial Roth IRA and manages investments until the minor reaches the age of majority or the custodian hands control over per account rules.

Teen-Owned / Youth Brokerage Accounts

Examples & features: Some brokers offer teen accounts (ages roughly 13–17) where the teen has a login and limited control, and a parent or custodian retains ultimate approval authority. Popular features include learning tools, spending cards, and educational content.
Typical controls: Parents can monitor trades, approve or limit trading, and restrict access to risky products. These accounts often allow stocks and ETFs but block margin, options, and crypto.
App-based platforms: Family-focused fintech apps combine custodial mechanics with modern UX (savings goals, chores-to-earn, allowance integration). They emphasize education and parental oversight.

Joint Accounts and Trusts

Joint accounts: In some systems, parents and minors can hold joint accounts, but joint ownership methods vary legally. Joint accounts may expose assets to the adult’s liabilities or estate.
Trusts: A trust can hold investments for a minor and provide flexible distribution rules, though trusts are more complex and may require legal advice.

Education / Simulated Accounts

Paper trading and mock portfolios: For learning, simulated accounts let teens practice without real money. These are ideal for learning order types, portfolio construction, and risk management.
Advantages: No risk of real loss, easy to reset, and often include realistic market data for practice.

Broker Policies and Typical Restrictions for Minors

Brokers commonly apply specific rules or limitations to custodial, teen, or minor-related accounts. Typical restrictions include:

No margin trading or borrowing.
No options trading or complex derivatives.
Limited or no access to IPO allocations.
No access to certain leveraged or inverse ETFs.
In many cases, no direct cryptocurrency trading on custodial/teen accounts.

Concrete example: As of 2024 public FAQs noted that some teen-focused brokerage accounts allow trading of stocks and ETFs but explicitly prohibit margin and options. A teen account may exclude cryptocurrencies and complex leveraged products.

(For current, precise restrictions, review the broker’s published youth-account terms.)

How to Open an Account — Typical Steps

Opening a minor-friendly investment account generally follows these steps:

Choose the account type: custodial UGMA/UTMA, custodial Roth IRA (if eligible), teen brokerage account, trust, or paper trading.
Gather documentation: parent/guardian ID, minor’s ID or birth certificate, Social Security Number or tax ID for both parties, and proof of address where required.
Complete the application: the adult custodian accepts account agreements and designates the minor as beneficiary.
Fund the account: link a bank account, transfer funds, or set up recurring contributions. For custodial Roth IRAs, confirm the minor’s earned income and document wages if required.
Set permissions: choose trading limits and parental approval workflows for teen accounts; configure notifications and approval requirements.
Verification and approval: broker completes identity checks and account verification, which can include identity verification services and compliance screening.

For app-based teen accounts, parents generally initiate the account and invite the teen. The parents maintain primary control and can grant limited trading privileges.

Taxes and Financial Reporting

Tax rules differ by country, but the following are common U.S.-centric considerations that illustrate typical points to watch:

Tax ownership: Custodial account assets legally belong to the minor. Taxable events (dividends, interest, capital gains) are often reported in the minor’s tax filings but may be subject to special rules.
The “kiddie tax”: In the U.S., unearned income above a threshold may be taxed at the parents’ marginal tax rate. Reporting requirements can include filing a tax return for the minor and completing appropriate schedules.
Capital gains: Capital gains realized in a custodial account are taxed per the beneficiary’s tax rules and applicable thresholds.
Custodial Roth IRA: Contributions come from the minor’s earned income and grow tax-advantaged; qualified withdrawals are generally tax-free under Roth rules.
Gifting rules: Contributions to custodial accounts are usually treated as irrevocable gifts to the minor. U.S. gift-tax annual exclusion rules may apply for large gifts.

Parents and custodians should consult a tax professional for specific questions and keep careful records of contributions, earnings, and transfers.

Investment Considerations and Best Practices for Minors

Minors and their custodians should prioritize education and long-term discipline. Recommended approaches include:

Long-term focus: Emphasize buy-and-hold strategies, especially diversified index funds or ETFs, to benefit from time in the market.
Diversification: Use broad-market index funds or diversified ETFs to reduce single-stock risk.
Dollar-cost averaging: Regular, modest contributions reduce timing risk.
Fractional shares: Useful for starting small; fractional investing helps build diversified positions even with limited funds.
Education and practice: Start with simulated trading and educational resources, then transition to small real investments as understanding grows.
Avoid speculative products: Options, margin, leveraged ETFs, and short-selling are inappropriate for most minors due to complexity and high risk.
Recordkeeping: Track contributions, trade histories, tax documents, and communications with the custodian.

Parental and Custodian Responsibilities

Custodians hold a fiduciary-like duty to manage custodial accounts in the minor’s best interests. Responsibilities include:

Acting prudently and in the beneficiary’s best interest when making investment decisions.
Keeping accurate records of contributions, trades, and distributions.
Avoiding commingling of personal funds with custodial assets.
Providing the beneficiary access to account information when appropriate and transferring control at the legally required age.

Practical guidance for parents: hold regular conversations about financial goals, set investment rules (e.g., approval thresholds), and use trades as learning moments rather than speculative permission slips.

Transition When the Minor Reaches Majority

When a minor reaches the age of majority (varies by jurisdiction), custodial accounts typically convert as follows:

Automatic transfer: The custodian must transfer legal ownership and control to the beneficiary once they reach the specified age.
Broker procedures: Brokers often require the new adult to provide ID and update account details. Some brokers may offer options to convert the custodial account to a standard brokerage account.
Tax and gifting implications: Transfers are generally not taxable events (the minor already owned the assets), but the new adult assumes full control and responsibility for future taxes and account decisions.

Parents should prepare beneficiaries for this transition with education on account management and tax filing responsibilities.

Alternatives to Direct Stock Trading for Minors

If direct equity trading isn’t appropriate, consider these alternatives:

529 education plans: Tax-advantaged saving for higher education in the U.S.
U.S. Savings Bonds: Low-risk, government-backed savings option.
Certificates of Deposit (CDs): Fixed returns for conservative savings.
Custodial mutual funds: Professionally managed, diversified funds held in a custodial structure.
Educational investing apps and courses: Combine simulated trading with structured curriculum to build skills before using real money.

These alternatives fit different goals and risk tolerances and can complement custodial investment strategies.

Risks, Legal/Ethical Considerations, and Fraud Awareness

Major risks include market losses, misuse of custodial funds, identity theft, and scams. To reduce risk:

Use regulated brokers and verify credentials with national regulators.
Monitor accounts regularly and require multi-factor authentication.
Watch for red flags: unsolicited investment offers, pressure to transfer funds, or requests for private credentials.
Maintain clear records and avoid sharing sensitive account information.

If a custodian misuses funds, legal remedies vary by jurisdiction — parents and beneficiaries may pursue civil or regulatory action. Keeping records and using regulated custodial channels reduces the likelihood of misuse.

Examples and Platform Snapshots

Below are concise examples of popular youth-oriented brokerage models and family investing platforms. These are illustrative snapshots based on public information and consumer guides.

Fidelity Youth: Target age range typically mid-teens (13–17). Control model: teen-owned trading with parental oversight and custodial-style controls. Notable limits: no margin, no options, and limited access to crypto on teen accounts. As of 2024, Fidelity’s youth account focuses on stocks and ETFs with educational features.
Greenlight: Parent-supervised investing platform that provides parental approval workflows. Control model: parent-controlled custodial mechanics with spending/investing tools for kids. Notable limits: parents set trading permissions; the platform emphasizes education and parental oversight.
Consumer guides such as Investopedia, Bankrate, Motley Fool, and TeenVestor provide practical walkthroughs and checklists for parents and teens exploring investing under 18.

As of 2026-01-21, consult each provider’s up-to-date terms and FAQs for precise age ranges and product limits.

Practical Steps for Teens Who Want to Start Now

Actionable checklist for motivated teens:

Learn the basics: Study stocks, ETFs, diversification, taxes, and safety.
Discuss with a parent/guardian: Decide on goals, timeline, and acceptable risk.
Choose an account type: custodial UGMA/UTMA, custodial Roth IRA (if eligible), teen brokerage, or simulated account.
Start small or practice: Use small contributions or paper trading to learn.
Track taxes and records: Keep pay stubs (for IRA eligibility), donation receipts, and trade confirmations.
Revisit goals quarterly: Adjust savings plans and education objectives.

Encouragement: Starting early builds financial habits. Use tools and parental oversight to learn without undue risk.

Appendix

Glossary

Custodian: The adult who manages a custodial account for a minor.
UGMA / UTMA: U.S. custodial account structures that allow gifts of securities and cash to minors.
Custodial Roth IRA: A Roth IRA established for a minor where contributions come from the minor’s earned income and an adult custodian manages the account until majority.
Margin: Borrowing money from a broker to buy securities — usually restricted for minor-related accounts.
Options: Derivative contracts giving the right but not the obligation to buy or sell an underlying asset — often blocked for minors.
Fractional shares: Portions of a full share that let investors buy fractions of expensive stocks.

Quick FAQ

Q: Can a 16-year-old open a brokerage account on their own? A: Generally no. Most brokers require an adult custodian or guardian for minors. Teen-specific accounts may allow teen access but with parental approval.

Q: What happens if a custodian uses funds improperly? A: Legal remedies vary by jurisdiction. Beneficiaries or guardians may pursue civil remedies, report misuse to the broker and regulator, and seek court action. Keeping records and using regulated custodial accounts reduces the risk.

Q: Can minors buy crypto? A: Many brokers block crypto trading in custodial or teen accounts. If crypto exposure is allowed, it’s often through parent-controlled features or specific custodial products. For web3 wallets, Bitget Wallet is a recommended choice for custodial and self-custody solutions where appropriate.

Final Notes and Next Steps

Can someone under 18 trade stocks? Yes — minors have multiple lawful pathways to invest, but these routes involve adult oversight, legal constraints, and product restrictions. Parents and teens should prioritize education, conservative choices, and regulated custodial channels.

If you want to explore custody and wallet options that integrate modern security and educational tools, consider reviewing custodial wallet features such as those provided by leading wallet solutions. For Web3 custody and wallet needs, Bitget Wallet offers secure options suitable for families and custodial arrangements — check Bitget Wallet’s official documentation for product specifics and the latest features.

To move forward: learn the basics, discuss goals with a parent or guardian, choose an age-appropriate account type, and start small or practice with simulators. For legal and tax specifics, consult a qualified professional.

Want more practical guides like this? Explore Bitget’s educational resources and wallet solutions to learn how to combine custody, security, and a structured learning path for new investors.

The content above has been sourced from the internet and generated using AI. For high-quality content, please visit Bitget Academy.