Can a 15 Year Old Invest in Stocks?

Investing in the stock market interests many, including younger generations eager to build financial literacy and wealth. A common question for those under legal adulthood is: can a 15-year-old invest in stocks? While direct participation is not legally permissible for minors, established legal structures allow them to own investments. These mechanisms foster early engagement with financial markets under adult supervision, building a foundation for future financial independence.

Legal Age for Direct Investing

Individuals generally cannot directly engage in stock market transactions or open brokerage accounts if they are under the age of majority. This is due to contractual capacity, which requires a person to be of a certain age to enter into legally binding agreements. In most states, the age of majority is 18, though it can be 19 or 21 in some jurisdictions. Opening a brokerage account involves entering contracts with financial institutions, and minors lack the legal standing to form such agreements. This restriction protects minors from potentially unfavorable financial commitments. Brokerage firms are unwilling to establish direct investment relationships without the ability to enforce contracts with individuals under the age of majority. Therefore, a 15-year-old cannot open their own investment account or directly buy and sell stocks.

Custodial Investment Accounts Explained

For minors to own investments, Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts are primary legal vehicles. These custodial accounts allow an adult, known as the custodian, to manage assets for a minor beneficiary without a formal trust. Assets held within these accounts legally belong to the minor from contribution, making the transfer irrevocable.

The distinction between UGMA and UTMA accounts lies in the types of assets they can hold. UGMA accounts are limited to financial assets like cash, stocks, bonds, mutual funds, and life insurance policies. UTMA accounts offer broader flexibility, allowing for almost any asset, including real estate, intellectual property, and fine art, in addition to financial assets. All states have adopted UGMA, while most have also adopted UTMA, which often supersedes UGMA.

The custodian, typically a parent or grandparent, assumes a fiduciary duty to manage the account prudently and exclusively for the minor’s benefit. Investment decisions and withdrawals must serve the minor’s welfare, such as educational expenses. Investment income generated within these accounts is considered the minor’s income. For 2025, the first $1,350 of unearned income is exempt from federal income tax, and the next $1,350 is taxed at the child’s rate. Unearned income exceeding $2,700 is subject to “kiddie tax” rules, taxed at the parent’s marginal tax rate.

Opening and Managing a Custodial Account

Opening a custodial account is a straightforward process, typically initiated by the adult custodian. To establish the account, the custodian provides their personal details, including their Social Security number, along with the minor’s legal name, date of birth, and Social Security number. Many major brokerage firms offer custodial account options.

Once established, funding can occur through cash contributions or existing securities. The custodian is responsible for all investment decisions, ensuring they align with the minor’s best interests. Ongoing management includes maintaining records of transactions, monitoring investment performance, and fulfilling tax obligations. While the minor owns the assets, the custodian retains full control until the beneficiary reaches the age of majority as defined by state law.

Transferring Assets Upon Adulthood

The custodial account concludes when the minor beneficiary reaches the age of majority, often called the termination age. This age varies by state, typically 18 to 21 years old, though some states allow extensions up to 25 years for UTMA accounts. At this point, the custodian is legally obligated to transfer full control and ownership of all remaining assets to the now-adult beneficiary.

The transfer process usually involves converting the custodial account into a standard individual brokerage account in the beneficiary’s name. Brokerage firms have specific procedures for this transition, and the beneficiary may need to provide identification, such as a birth certificate or government-issued ID, to confirm their age. Once complete, the individual gains full legal control over the assets and can manage them as they deem fit, whether by continuing to invest, selling holdings, or transferring funds.