What Age Can You Start Investing in Stocks?

Investing in the stock market involves participating in the buying and selling of shares of publicly traded companies. Many people consider engaging with the stock market to potentially grow their wealth over time. A common question that arises for individuals and families considering this path is whether there are age restrictions on when someone can begin investing. Understanding the legal framework is an important first step for anyone looking to enter the market.

Minimum Age for Direct Stock Investing

An individual must meet an age requirement to open a brokerage account and engage in direct stock trading. In most U.S. states, the legal age of majority is 18 years old. This age signifies legal adulthood and the capacity to enter contracts, a fundamental aspect of financial transactions like buying or selling stocks.

Legal capacity ensures individuals understand the implications and responsibilities of financial agreements. Brokerage firms adhere to this standard, as contracts signed by minors may be unenforceable. This principle protects both the individual and financial institutions involved in market activities. While a few states might have an age of 21 for certain financial actions, 18 is the prevalent age for independent brokerage account ownership.

Investment Options for Minors

Though minors cannot directly open brokerage accounts, established mechanisms allow them to own investments. Custodial accounts, created under the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA), are the primary tools. These accounts are designed to hold assets for a minor, with an adult managing the account on their behalf.

In a custodial account, the minor is the beneficial owner of the assets. An adult custodian manages these assets in the minor’s best interest until they reach the age of majority. UGMA accounts are limited to financial assets like cash, stocks, bonds, and mutual funds. UTMA accounts offer broader flexibility, allowing for a wider range of assets, including real estate, intellectual property, and other tangible property.

Setting Up a Custodial Account

Establishing a custodial account is a straightforward process, initiated by a parent or legal guardian. Before applying, gather information for both the custodian and the minor. This includes their full legal names, dates of birth, and Social Security Numbers. The custodian also needs to provide contact information (address, phone, email) and details for linking a bank account for initial funding.

Most major brokerage firms offer custodial accounts and facilitate online applications, though some may offer physical forms. Once information is prepared, navigate the brokerage firm’s website to their account opening section, often under “Education” or “Accounts for Minors.” The online application guides you through entering data into the appropriate fields. After completing forms, the final step involves electronically signing and submitting the application, often followed by an initial transfer of funds to activate the account.

Managing and Transferring Custodial Assets

Once a custodial account is established, the custodian assumes responsibilities for managing assets. The custodian has a fiduciary duty, legally obligating them to manage investments prudently and solely for the minor’s benefit. This includes making investment decisions, maintaining accurate records, and ensuring withdrawals are used directly for the minor’s needs. The assets placed in the account become an irrevocable gift to the minor and cannot be reclaimed by the custodian.

Earnings in a custodial account are subject to “kiddie tax” rules. For 2025, the first $1,350 of a child’s unearned income (including investment income like dividends, interest, and capital gains) is tax-free. The next $1,350 is taxed at the child’s marginal tax rate. Any unearned income exceeding $2,700 for the year is taxed at the parents’ marginal tax rate.

Custodianship concludes when the minor reaches the age of majority, and assets transfer to them. This age varies by state and account type, ranging from 18 to 21, or up to 25 in some instances. Upon reaching this age, the now-adult gains full control over the account and its contents, with the ability to use funds for any purpose. Brokerage firms notify the custodian and beneficiary when transfer is needed, often requiring paperwork to re-register the account in the now-adult’s name.