How Old Do You Have to Be to Own Stocks?

Investing in the stock market offers a path to financial growth. While direct participation in stock ownership has specific age requirements, various mechanisms exist to allow individuals to begin their investment journey earlier in life. This guide clarifies how individuals can engage with financial markets and outlines the standard age requirements for direct stock ownership, exploring structured approaches for younger investors to participate.

Direct Stock Ownership Requirements

In the United States, the legal age for an individual to open their own brokerage account and directly own stocks is generally 18 years old. This age aligns with the “age of majority” in most states, which signifies when an individual is considered a legal adult. At this point, individuals gain the capacity to enter into binding contracts, including agreements with financial institutions for brokerage services. Brokerage firms require account holders to be of legal age to ensure they can fully understand and agree to the terms and conditions of their investment accounts. Some states, however, set the age of majority for financial contracts at 21, meaning residents in those states must be at least 21 to open an independent brokerage account.

Before reaching this age, individuals cannot legally sign the necessary contracts to open and operate a brokerage account themselves. The principle behind this regulation is to protect minors from entering into financial obligations they may not fully comprehend.

Investing for Minors Through Custodial Accounts

Individuals under the age of majority can still own stocks and other investments through custodial accounts, established under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA). A custodial account is an investment account set up by an adult, known as the custodian, for the benefit of a minor, who is the beneficiary. While the minor legally owns the assets within the account, the custodian manages the investments until the minor reaches the age of majority.

UGMA and UTMA accounts differ mainly in the types of assets they can hold. UGMA accounts are limited to financial assets such as cash, stocks, bonds, mutual funds, and insurance policies. In contrast, UTMA accounts offer broader flexibility, allowing for a wider range of assets including real estate, intellectual property, and other tangible property, in addition to financial assets. Most states have adopted UTMA, which generally supersedes UGMA where it is enacted.

The custodian, who can be a parent, guardian, or another adult, has a fiduciary responsibility to manage the assets prudently for the minor’s benefit. This means the custodian must make investment decisions that are in the best interest of the minor and cannot use the funds for their personal expenses. Contributions to these accounts can come from various sources, including parents, grandparents, or other relatives, and are considered irrevocable gifts to the minor.

Income generated within custodial accounts is generally taxed to the minor, but specific rules known as the “kiddie tax” may apply. For 2025, if a minor’s unearned income, which includes investment income, exceeds $2,700, the amount above this threshold is taxed at the parents’ marginal tax rate. The first $1,350 of unearned income is tax-free, and the next $1,350 is taxed at the child’s lower tax rate.

Managing and Transitioning Custodial Accounts

Until the minor beneficiary reaches the age of majority, the custodian maintains oversight of the account, fulfilling their fiduciary duties. This includes making all investment decisions and ensuring that any distributions from the account are solely for the minor’s benefit.

When the minor reaches a specific age, typically 18 or 21 depending on the state and the type of custodial account (UGMA or UTMA), the assets in the account become the legal property of the now-adult beneficiary. While UGMA accounts commonly transfer at age 18, UTMA accounts may transfer at 18, 21, or even up to 25 in some states if specified at account setup. This age is referred to as the “age of termination” or “age of majority” for the custodial account.

The transfer process usually involves converting the custodial account into a standard brokerage account in the new adult’s name. The custodian and the beneficiary generally contact the financial institution to complete the necessary paperwork, which may include a transfer or registration change request form and proof of the beneficiary’s age, such as a government-issued ID. Assets can often be transferred in-kind, meaning the investments do not need to be sold, avoiding potential capital gains taxes at the time of transfer.

Once the assets are transferred, the former minor gains full control and authority over the funds and investments. They can then manage the portfolio as they see fit, whether by continuing the investments, adjusting the strategy, or withdrawing the funds for any purpose. This transition marks the end of the custodian’s role and the beginning of the beneficiary’s independent financial management.