can under 18 trade stocks — Complete Guide

Can people under 18 trade stocks?

can under 18 trade stocks is a common question for teens, parents, and educators. In short: minors generally cannot open or legally sign for their own brokerage accounts, but they can own and trade stocks through adult-supervised vehicles and youth-focused products. This guide explains the legal and regulatory framework, the main account types (custodial brokerage accounts under UGMA/UTMA, custodial Roth IRAs, youth accounts), trading mechanics, taxes (including the "kiddie tax"), typical restrictions (no margin, usually no options trading), practical steps to get started, and safe best practices for families.

As you read, you will learn: who can legally hold securities for a minor, how trades are executed for teens, tax and financial-aid impacts, common investment products recommended for young investors, and recommended next steps for parents and teens.

Quick note on market context: As of January 14, 2026, according to Benzinga, market activity was choppy — the Russell 2000 hit a new all-time high while the Nasdaq fell 0.66%, the S&P 500 fell 0.38%, and the Dow Jones Industrial Average fell 0.29%. This volatility illustrates why long-term, diversified approaches are often recommended for new and young investors.

Legal and regulatory overview

Most U.S. broker-dealers require account holders to be at least 18 years old (21 in some states) to open and legally sign for their own brokerage account. That means most people asking "can under 18 trade stocks" will rely on adult-supervised vehicles where an adult custodian or guardian opens and manages the account on behalf of the minor until a statutory age of majority.

Federal regulators that set rules relevant to brokerage accounts include the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). These regulators require brokerages to verify client identities and maintain recordkeeping; they also mandate disclosures and limit certain risky account privileges (for example, margin and options) for accounts where the legal owner is a minor or where the account is structured to limit contractual capacity.

Age thresholds and state law variations

• Most brokers accept age 18 as the legal minimum to open an independent brokerage account; some require age 21 for full legal capacity in particular states.
• Custodial account rules are governed by state law (Uniform Gifts to Minors Act — UGMA, or Uniform Transfers to Minors Act — UTMA). The age when custodial assets must transfer to the beneficiary varies by state (commonly 18 or 21, some states allow the custodian to set transfer up to 25).
• Because transfer age can vary, parents and custodians should check the UTMA/UGMA termination age in their state when planning long-term use of custodial accounts.

Regulatory constraints on certain activities

• Margin accounts: minors cannot enter enforceable margin agreements, so custodial or teen accounts typically disallow margin borrowing until legal age and contractual capacity are present.
• Options and certain derivatives: broker platforms usually restrict options trading and complex derivatives to adults who meet suitability and approval criteria; custodial/teen accounts often disallow or heavily limit options trading.
• Binding contracts: minors cannot legally enter many contracts in most states, which is why custodial structures exist — the adult signs and accepts responsibility.

Common account types and vehicles for minors

There are several common legal and product pathways that answer the practical question "can under 18 trade stocks?" by enabling minors to own and/or direct investments with adult supervision.

Custodial brokerage accounts (UGMA / UTMA)

• What they are: Adult custodian (often a parent) opens an account that is legally owned by the minor. The custodian controls investment decisions until the minor reaches the state's age of majority or the age specified by law.
• Ownership and control: The minor is the legal owner of assets; the custodian manages the account for the minor’s benefit.
• Transfer/termination age: Varies by state (commonly 18 or 21; some UTMA accounts allow transfer up to 25).
• Pros: Simple to open, flexible investment options (stocks, ETFs, mutual funds), good for general gifting or long-term saving.
• Cons: Assets count as the child’s property for financial-aid calculations, and once transferred to the beneficiary, the minor gains full control and can use funds for any purpose.

Custodial Roth IRA / retirement accounts for minors

• Eligibility: Minors with earned income (from part-time jobs, self-employment, etc.) can have a custodial Roth IRA in most cases, provided contributions do not exceed earned income or annual contribution limits.
• Benefits: Tax-advantaged retirement growth, early contributions benefit from compounding, qualified withdrawals (after age and holding rules) are tax-free.
• Limitations: Contributions are limited by earned income; custodial setup means the adult custodian usually administers the account until the minor attains legal age.

Youth or teen brokerage accounts (provider-specific products)

• Many brokers and fintech apps offer teen-focused or guardian-linked investing accounts that allow a minor to trade with parental oversight. These products differ by provider on ownership (custodial vs. custodial-like), trade permissions, and educational features.
• Features often include parental controls, commission-free trades, fractional shares, and educational content. Some teen accounts are custodial accounts under UGMA/UTMA; others are custodial-like with different user interfaces.

529 plans and education-focused accounts

• While not traditional brokerage accounts, 529 plans invest contributions toward education and can offer investment options (age-based or static). They are owned by an adult (account owner) and the beneficiary is usually the child.
• 529s differ from custodial brokerage accounts because funds are for qualified education expenses and do not transfer to the child as an unrestricted asset when they come of age.

Gifts and direct stock ownership

• Donors can transfer shares to a custodian for a minor or use direct registration systems to place securities in the minor’s name under custodial rules. Recordkeeping for gifts and cost basis is important.

How trading and investment mechanics work for minors

Even though minors cannot legally open independent accounts in most cases, trades and investment activity for minors follow normal market mechanics, executed by the custodian or via a teen-enabled platform.

Funding and custody

• Funding a custodial or teen account is typically done by the custodian or parent via bank transfer, check, or electronic methods. Gifts to the minor can be contributed, but custodians must adhere to gift-tax rules for large transfers.
• For a custodial Roth IRA, the minor’s earned income documentation is needed to justify contributions.

Trades, orders, and settlement

• Trades placed in custodial accounts are routed and executed by the brokerage; settlement times follow standard market rules (T+1/T+2 depending on the security type and market rules).
• Many teen accounts support market orders, limit orders, ETF and mutual fund purchases, and fractional-share buying to enable small-dollar investing.

Trade permissions and parental controls

• Teen-focused apps commonly offer parental approval workflows: parents can require approvals on trades, set daily/weekly limits, or receive notifications of activity.
• Custodial accounts give the adult full control until the transfer age; some brokers provide teen-facing dashboards while keeping legal control with the custodian.

Taxes, reporting, and financial aid considerations

Investment income generated by a minor may be taxable and triggers reporting and potential special tax rules.

Kiddie tax overview

• The "kiddie tax" applies to unearned income of certain children and can tax a portion of a minor’s investment income at the parent's marginal tax rate once thresholds are exceeded.
• Basic structure: a limited amount of a minor’s investment income may be taxed at the child’s tax rate; amounts above that threshold may be taxed at parents’ rates under the kiddie tax rules—rules and thresholds change with tax law, so check current IRS guidance or a tax professional.

Reporting and basis recordkeeping

• Custodial account income is reported on the child’s tax return when required. Brokers typically issue consolidated tax statements in the custodian’s and beneficiary’s names.
• Keep careful records of gifts, contributions, and cost basis for each security. Good recordkeeping avoids future confusion when the minor takes control.

Financial aid impact

• Custodial account assets are generally treated as the student’s assets for federal financial aid calculations (FAFSA), which can reduce need-based aid eligibility more than if the assets were held by the parent in certain account types.
• 529 plan assets owned by a parent often have lower impact on FAFSA calculations than custodial accounts, which is why families sometimes prefer 529s for education savings.

Investment products minors commonly use

When asking "can under 18 trade stocks," families often want to know what types of investments a minor can own through custodial or teen accounts. Common options include:

• Individual stocks — direct company shares; widely available in custodial accounts but carry single-stock risk.
• ETFs and index funds — diversified baskets that reduce single-stock risk and often have lower fees.
• Mutual funds — available in many custodial accounts, sometimes with minimum investments.
• Fractional shares — let teens buy a portion of an expensive stock with small amounts of cash.
• Bonds and bond funds — provide income and diversification but may have minimums.

ETFs and index funds as default options

• For many first-time and young investors, low-cost ETFs or index funds offer instant diversification, low fees, and simple long-term strategies. They are commonly recommended for new investors because of reduced concentration risk and cost efficiency.

Fractional shares and micro-investing features

• Fractional shares allow teens to buy parts of high-priced stocks and are common on teen-friendly platforms. They enable regular small-dollar investing and dollar-cost averaging strategies.

Risks, investor protections, and best practices

Trading and investing involve risk. For minors and their guardians, it’s important to balance learning with protection.

Key risks

• Market risk: investments can lose value; single-stock positions are particularly volatile.
• Overtrading and behavioral pitfalls: social-media-driven hype, impulsive trades, and chasing short-term gains are common mistakes.
• Scams and fraud: minors may be targeted by online misinformation or get-rich-quick schemes.

Protections and safeguards

• SIPC coverage: most U.S. brokerages provide SIPC protection for brokerage account cash and securities up to standard limits (this protects against broker failure, not market losses).
• Account security: use strong passwords, two-factor authentication, and regular account monitoring.
• Parental controls: use broker-provided parental controls or approval workflows to supervise teen activity until the child demonstrates responsible trading habits.

Best practices for teens and parents

• Start with education: learn basic investing concepts (diversification, risk tolerance, compounding).
• Emphasize long-term goals: prioritize ETFs/index funds or diversified approaches rather than short-term speculation.
• Use small amounts first: micro-investing and fractional shares help teens learn without risking large capital.
• Keep records: track cost basis, transaction dates, and tax documents.

How to get started: step-by-step for teens and parents

1. Learn the basics: read beginner-friendly resources on stock market fundamentals, taxes, and account types.
2. Decide goals and timeline: is money for long-term retirement, college, or a near-term purchase?
3. Choose the account type: custodial brokerage (UGMA/UTMA) for general investing, custodial Roth IRA if the teen has earned income, or a 529 for education savings.
4. Pick a broker or teen-investing app: evaluate fees, custodial product availability, parental controls, fractional share support, and educational tools.
5. Open the account: the adult custodian will need identification, beneficiary information, and funding source details.
6. Fund and start small: consider starting with ETFs or diversified funds and using recurring contributions.
7. Track performance and taxes: monitor investments, keep records for tax reporting, and review goals annually.

Educational resources and practice tools

• Mock trading platforms and paper trading can teach order types and market mechanics without risking money.
• Public educational publishers and investment education sites provide beginner lessons, glossaries, and tutorials suitable for teens.
• Many teen brokerage apps include in-app lessons, quizzes, and tracked portfolios for learning-by-doing.

Choosing a broker or app — selection criteria

• Custodial product availability: confirm the broker supports UGMA/UTMA or teen-focused custodial products.
• Fees and commissions: choose low-cost platforms that allow small-dollar investing and fractional shares.
• Parental controls and educational features: look for trade approvals, spending limits, and learning resources.
• Security and reputation: confirm SIPC membership and robust account security measures.

Note: If you use or mention Web3 wallets or decentralized custody as part of educational exploration, consider Bitget Wallet as a recommended option for secure, user-friendly Web3 custody and learning. For custody of securities and fiat instruments, choose regulated brokerage services.

Alternatives to direct stock trading

If the goal is financial learning or saving but not direct stock trading, consider alternatives:

• Simulated trading and paper-trade platforms — risk-free practice.
• Robo-advisor custodial accounts — automated, diversified portfolios managed to a risk profile.
• Savings bonds and certificates of deposit (CDs) — low-risk vehicles for capital preservation.
• Work and earned-income strategies — encourage teens to earn income (enabling Roth IRA contributions) and build financial responsibility.

International perspective (brief)

Rules and minimum ages vary widely outside the U.S. Some countries allow minors to hold accounts with parents as joint account holders; others require custodial structures similar to UGMA/UTMA. Always check local laws and broker policies before opening an account for a minor.

Frequently asked questions (FAQ)

Q: Can I open my own account at 16? A: In most U.S. states you cannot open a legally independent brokerage account at 16. Instead, an adult (parent/guardian) opens a custodial or teen account in compliance with UGMA/UTMA or the broker’s teen account program.

Q: can under 18 trade stocks on their own platforms? A: can under 18 trade stocks on their own platforms is generally not permitted without an adult custodian; teen-friendly platforms require a guardian to open and oversee a custodial or linked account.

Q: Can a minor trade options or use margin? A: Minors and custodial accounts are typically restricted from options trading and margin borrowing until the beneficiary reaches legal age and the account meets broker approval for complex products.

Q: What happens when I turn 18 or 21? A: When the minor reaches the age specified by state law or the custodial agreement, control of UGMA/UTMA custodial assets transfers to the beneficiary — they can invest, spend, or transfer assets without custodian approval.

Q: Do parents pay taxes on their child’s investment income? A: Investment income in a custodial account is generally reported in the child’s name, but the kiddie tax may cause some investment income to be taxed at the parent’s rate. Consult current IRS guidance or a tax professional for specific thresholds and filing rules.

Q: can under 18 trade stocks using fractional shares? A: Yes — fractional shares are available in many custodial and teen accounts, enabling small-dollar investments; platform availability varies, so confirm with your chosen provider.

See also

• Custodial accounts (UGMA/UTMA)
• Roth IRA for minors
• 529 college savings plan
• Kiddie tax
• Teen investing apps and educational platforms

References and further reading

Sources used to compile this guide include public investor education pages and industry resources: Fidelity, Investopedia, Greenlight, NerdWallet, Bankrate, The Motley Fool, TeenVestor, and Copper. For market context cited above: Benzinga market overview (as of January 14, 2026). For tax rules, consult official IRS publications and your tax professional. Always check broker-specific terms and state custodial law for final details.

Notes and disclaimers

This article is informational only and does not constitute investment, tax, or legal advice. Rules, tax thresholds, and broker product features change over time. Always verify the latest brokerage policies and consult a qualified tax or legal advisor for your situation.

Further steps: If you’re a parent or teen ready to learn-by-doing, consider opening a custodial account with a reputable broker that offers parental controls and low-cost ETFs, start with small recurring contributions, and use educational tools or paper trading to build skills. For Web3 custody and exploration, the Bitget Wallet offers an integrated, secure option designed for users getting started with decentralized assets.