How Old Do You Have to Be to Start Stocks?

Many individuals recognize the potential for wealth accumulation through stock market investing. While early investing offers long-term financial advantages, direct participation by individuals below a certain age is restricted by law. However, specific legal frameworks and account types facilitate investing for those who have not yet reached adulthood.

The Age of Majority and Investing

The age of majority, generally 18 years in most U.S. jurisdictions, is the legal age for entering most contracts, including opening a brokerage account. Individuals under this age are considered minors and lack the legal capacity to independently execute financial agreements, protecting them from exploitation or misunderstanding contracts.

Minors cannot directly open or manage investment accounts due to these limitations. Financial institutions require account holders to be of legal age to ensure responsibility for financial decisions, safeguarding both the minor and the institution.

Investment Accounts for Minors

Individuals under the age of majority can invest through custodial accounts. The Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) are state laws providing a framework for transferring assets to minors. An adult custodian establishes and manages these accounts for the minor’s benefit. While the custodian controls the account, the assets are irrevocably owned by the minor.

The custodian has a fiduciary duty to manage assets prudently, making investment decisions and ensuring assets are used for the minor’s welfare, such as educational expenses. UGMA accounts hold financial assets like stocks, bonds, mutual funds, and cash. UTMA accounts offer broader flexibility, permitting assets like real estate and intellectual property. Both account types are subject to gift tax rules upon initial contribution, though annual exclusion limits allow for significant contributions without incurring gift tax. For 2025, the annual gift tax exclusion is $19,000 per recipient.

Retirement Accounts for Minors

Minors with earned income can establish retirement savings vehicles, such as a Custodial Roth IRA. Unlike UGMA/UTMA accounts, Roth IRA contributions require taxable compensation from employment or self-employment. Earned income must at least equal the contribution amount, up to the annual limit. For example, in 2025, the maximum Roth IRA contribution is the lesser of the minor’s earned income or $7,000.

An adult custodian opens a Custodial Roth IRA on behalf of the minor. The custodian manages investments within the account, similar to a UGMA/UTMA account. Roth IRAs are designed for retirement savings, with qualified distributions being tax-free. This provides an advantage, as contributions grow tax-free and withdrawals are tax-free under qualifying conditions.

Transitioning Accounts at Adulthood

Upon reaching the age of majority, assets in a custodial account (UGMA, UTMA, or Custodial Roth IRA) transfer to the now-adult beneficiary’s direct control. The transfer age varies, typically 18 to 21, depending on state UGMA or UTMA provisions. For Custodial Roth IRAs, transfer generally occurs at the age of majority, which is 18 in most states.

The custodian initiates this transfer by notifying the brokerage firm. The brokerage re-registers the account in the beneficiary’s name, granting full control and responsibility for the assets. This transition grants the former minor independent access and management of their accumulated investments. At this stage, the individual can maintain existing investments, reallocate them, or withdraw funds, subject to account-specific rules like withdrawal penalties for non-qualified Roth IRA distributions.

Citations:
The legal age for entering into most contracts, including opening a brokerage account, is generally referred to as the age of majority. In most jurisdictions across the United States, this age is set at 18 years. Individuals under this age are legally considered minors and typically lack the full legal capacity to independently execute binding financial agreements.
Minors are generally not permitted to directly open or manage investment accounts due to these legal limitations concerning contractual liability.
The Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) are two widely adopted state laws that provide a framework for transferring assets to minors. These accounts are established by an adult, known as the custodian, who manages the assets for the minor’s benefit. While the custodian controls the account, the assets within it are legally and irrevocably owned by the minor beneficiary. The custodian has a fiduciary duty to manage the assets prudently and in the best interest of the minor. This includes making investment decisions, maintaining records, and ensuring the assets are used for the minor’s welfare, such as educational expenses or other benefits. UGMA accounts generally allow for holding financial assets like stocks, bonds, mutual funds, and cash.
The Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) are two widely adopted state laws that provide a framework for transferring assets to minors. While the custodian controls the account, the assets within it are legally and irrevocably owned by the minor beneficiary. UTMA accounts offer broader flexibility, permitting a wider range of assets, including real estate, intellectual property, and other tangible or intangible assets.
Both account types are subject to gift tax rules upon initial contribution, though annual exclusion limits typically allow for significant contributions without incurring gift tax.
For 2025, the annual gift tax exclusion is $19,000 per recipient.
For individuals under the age of majority, specific legal structures allow for investment participation, primarily through custodial accounts. Minors who generate earned income can also establish retirement savings vehicles, most notably a Custodial Roth IRA. Unlike UGMA/UTMA accounts, contributions to a Roth IRA are contingent upon the minor having taxable compensation from employment or self-employment. A Custodial Roth IRA is opened by an adult custodian, typically a parent or guardian, on behalf of the minor beneficiary. The custodian manages the investments within the account, similar to how they would with a UGMA/UTMA account. The primary distinction lies in the purpose and tax treatment: Roth IRAs are specifically designed for retirement savings, with qualified distributions in retirement being tax-free. This provides a significant advantage, as contributions grow tax-free and withdrawals are also tax-free under qualifying conditions. At this stage, the individual can choose to maintain the existing investments, reallocate them, or withdraw funds as they see fit, subject to the rules of the specific account type, such as withdrawal penalties for non-qualified Roth IRA distributions.
For example, in 2025, the maximum Roth IRA contribution is the lesser of the minor’s earned income for the year or $7,000.
Upon reaching the age of majority, the assets held within a custodial account, whether a UGMA, UTMA, or Custodial Roth IRA, are legally transferred to the direct control of the now-adult beneficiary. The specific age for this transfer can vary, typically between 18 and 21 years old, depending on the state’s specific Uniform Gifts to Minors Act or Uniform Transfers to Minors Act provisions.
For Custodial Roth IRAs, the transfer generally occurs when the minor reaches the age of majority, which is 18 in most states. Many individuals, including younger ones, recognize the potential for wealth accumulation through investing in the stock market. This interest often leads to questions about the appropriate age to begin such endeavors. While the desire to start investing early is understandable and can offer long-term financial advantages, direct participation in the stock market by individuals below a certain age is generally restricted by law. Specific legal frameworks and account types exist to facilitate investing for those who have not yet reached adulthood, providing pathways to begin building an investment portfolio.