How Old Do I Have to Be to Trade Stocks?

Stock trading allows individuals to buy and sell ownership shares in publicly traded companies. Accessing these markets involves established processes and specific account structures, which vary based on an individual’s age.

Age Requirements for Trading

To engage in stock trading independently, an individual must meet the legal age of majority. In the United States, this age is generally 18 in most states, though it can be 21 in others. This requirement exists because trading involves entering into contracts, and individuals must possess the legal capacity to form binding agreements. Contracts signed by minors are typically not legally enforceable, which presents a risk for brokerage firms.

Brokerage firms mandate that account holders meet their state’s age requirement. This ensures individuals have reached adulthood and can be held financially responsible for their investment decisions. The age of majority signifies when a person legally gains control over their financial decisions and investments. For those under this age, direct trading is not permitted, necessitating alternative arrangements to participate in the market.

Trading for Minors

Individuals who have not yet reached the legal age for independent trading can still engage in stock market investing through specific legal structures, primarily custodial brokerage accounts. These accounts, often established under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA), allow an adult to manage investments for a minor. The assets held within these accounts are legally owned by the minor but are controlled by an adult custodian, typically a parent or guardian, until the minor reaches the age of majority.

The custodian holds a fiduciary duty, meaning they must manage the investments for the minor’s benefit, making all investment decisions and initiating trades. Funds from these accounts can be used for various expenses that directly benefit the minor, such as education, transportation, or extracurricular activities. Contributions to a custodial account are irrevocable gifts, meaning the assets cannot be taken back by the donor and must be transferred to the minor when they reach the age of majority. This age varies by state, commonly being 18 or 21, though some states allow it to be as late as 25.

Custodial accounts are subject to specific tax rules, commonly referred to as the “kiddie tax,” which applies to unearned income, such as interest, dividends, and capital gains, generated within the account. For the 2025 tax year, the first $1,350 of a child’s unearned income is generally tax-free due to the standard deduction for dependents. The next $1,350 of unearned income is taxed at the child’s tax rate. Any unearned income exceeding $2,700 for the 2025 tax year is taxed at the parent’s marginal income tax rate, rather than the child’s lower rate. This rule aims to prevent parents from shifting investment income to their children to avoid higher tax brackets.

Opening a Brokerage Account

Opening a brokerage account, whether for an adult or as a custodial account for a minor, involves several procedural steps. To begin, individuals (or custodians) will need to gather essential identification and financial information. This typically includes a Social Security number or other tax identification number, a government-issued photo ID, and proof of address. Brokerage firms require this information to comply with “Know Your Customer” (KYC) regulations, which verify identity and assess financial suitability.

The process generally starts by choosing a brokerage firm, considering factors like fees, available investment options, and the platform’s ease of use. Most brokerage firms offer online applications, which can often be completed quickly. After completing the application, applicants typically provide required documentation for verification.

Once the account is approved, it needs to be funded before any trading can occur. Common methods for funding an account include electronic funds transfers (ACH) from a linked bank account, wire transfers, or depositing checks. Electronic transfers are a widely used method, though they may take one to three business days for funds to settle and become available for trading. For custodial accounts, additional information for the minor and confirmation of the custodian’s legal authority will be required during the application process.