Can a 15-Year-Old Invest in Stocks?

Young individuals are increasingly interested in understanding the stock market and building financial independence. Many teenagers, including those around 15 years old, often wonder if they can directly participate in investment activities. The legal framework for minor investments presents specific considerations and pathways.

Direct Investment for Minors

A 15-year-old cannot directly open a brokerage account or manage their own investment portfolio. This restriction stems from legal principles concerning contractual agreements. Investment accounts require entering into legally binding contracts. Minors are generally not considered to have the legal capacity to enter such agreements, a protection designed to shield them from potentially disadvantageous financial obligations.

This legal incapacity means a brokerage firm cannot establish an account directly in a minor’s name. The primary reason is to prevent a minor from disaffirming a contract later, which could create significant legal and financial complications for the brokerage. Therefore, any investment activity for a 15-year-old must involve an adult who has the legal authority to act on their behalf.

Custodial Investment Accounts

The most common solution for a 15-year-old to own investments is through a custodial account, specifically a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account. These accounts are established and managed by an adult, known as the custodian, for the benefit of the minor. The assets held within these accounts legally belong to the minor from the moment they are deposited.

The custodian, typically a parent, guardian, or other relative, has the authority to make all investment decisions within the account. This includes choosing investments, buying and selling securities, and managing the portfolio. The custodian is legally obligated to manage the assets prudently and in the best interest of the minor. These accounts are opened at brokerage firms, and the account is registered under the minor’s Social Security number, though the custodian is listed as the managing party.

Upon reaching the age of majority, the assets in an UGMA or UTMA account are transferred directly to the now-adult beneficiary. The age of majority for these accounts varies by state, commonly ranging from 18 to 21 years old, and in some instances, can be extended up to 25. Once the assets are transferred, the former minor gains full control and can use the funds for any purpose, without restriction.

Tax Considerations for Minor Investments

Investments held in custodial accounts for minors are subject to specific tax rules, primarily the “Kiddie Tax.” This tax applies to a minor’s unearned income, which includes dividends, interest, and capital gains generated from investments. The purpose of the Kiddie Tax is to prevent parents from shifting investment income to their children to take advantage of lower tax brackets.

For the 2025 tax year, the first $1,350 of a child’s unearned income is tax-free due to the standard deduction for dependents. The next $1,350 of unearned income is taxed at the child’s lower tax rate. Any unearned income exceeding $2,700 is generally taxed at the parents’ marginal tax rate.

The Kiddie Tax rules apply to children who are under age 19 at the end of the tax year, or full-time students under age 24. Parents may elect to report their child’s interest and dividends on their own tax return using Form 8814 if the child’s gross income is less than $13,500 for 2025. Otherwise, the child may need to file their own tax return with Form 8615 to calculate the tax on unearned income.

Other Avenues for Youth Financial Engagement

Beyond formal custodial investment accounts, a 15-year-old can still engage with financial concepts and prepare for future investing. Participating in family discussions about budgeting, savings, and investment strategies provides valuable real-world context. Learning how investment decisions are made within a parent’s or guardian’s existing portfolio can be highly educational.

Educational resources such as books, online courses, and financial literacy programs offer structured learning opportunities. Many platforms also provide simulated stock trading environments, allowing teenagers to practice investing with virtual money. These simulations enable hands-on experience in portfolio management and market analysis without any financial risk.

Saving money in a traditional or high-yield savings account is another foundational step for financial literacy. While not an investment in stocks, it introduces concepts of earning interest and the power of saving. These avenues foster a strong understanding of financial principles and build confidence, laying the groundwork for more direct investment activities in adulthood.