Where to Buy Stocks When You Are Under 18

Investing in the stock market can be a valuable way to build wealth, yet direct stock ownership is not permitted for individuals under the age of 18. Minors generally cannot legally enter into contracts, which includes opening brokerage accounts. To address this, adults can establish a custodial account. This account allows an adult to manage assets for a minor beneficiary until they reach a designated age, enabling long-term financial planning. The assets held within these accounts are legally owned by the minor, though managed by a designated adult.

Custodial Account Basics

A custodial account is a specialized investment vehicle designed to hold assets for a minor. The account is managed by an adult, known as the custodian, for the exclusive benefit of the minor beneficiary. Once assets are placed into a custodial account, the transfer is irrevocable, meaning the assets legally belong to the minor and cannot be reclaimed by the donor.

Two primary types of custodial accounts exist: the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) accounts. UGMA accounts are typically limited to holding financial assets such as cash, stocks, bonds, mutual funds, and life insurance policies. In contrast, UTMA accounts offer broader flexibility, encompassing all assets permissible in UGMA accounts, along with physical assets like real estate, vehicles, intellectual property, and fine art. All states have adopted UGMA, but UTMA is not adopted in every state.

The custodian, often a parent or guardian, is responsible for managing the account’s investments in a prudent manner. This includes making investment decisions, reinvesting dividends, and ensuring all distributions are solely for the minor’s benefit. The minor cannot control the account until they reach the age of majority, which varies by state, typically between 18 and 25 years old.

Selecting an Investment Platform

Choosing an appropriate investment platform for a custodial account involves considering various factors. Financial institutions such as traditional brokerage firms, online discount brokers, and robo-advisors commonly offer custodial accounts. Each type of platform presents distinct advantages regarding investment options and management styles.

When evaluating platforms, review the available investment options, such as stocks, exchange-traded funds (ETFs), and mutual funds. Many platforms offer commission-free trading for stocks and ETFs, which can minimize costs over time. Some brokers also provide access to fractional shares, allowing investments in high-priced stocks with smaller amounts.

Fee structures are another consideration, including account maintenance fees, trading commissions, and advisory fees if using a robo-advisor. Many brokers offer custodial accounts with no minimum opening deposit and no recurring maintenance fees. Minimum investment requirements for specific funds or managed portfolios can vary, with some robo-advisors requiring initial deposits ranging from $5 to $500 or more. The ease of use of the platform’s interface and the quality of customer support are also important.

Opening a Custodial Account

Opening a custodial account requires the custodian to provide personal and financial information for themselves and the minor beneficiary. The custodian typically needs to furnish their full name, address, date of birth, and Social Security number. Similarly, the minor beneficiary’s full name, date of birth, and Social Security number are required for the account setup.

In addition to personal identification details, the custodian may need to provide employment information, including their estimated annual salary. Bank account information is generally requested for the initial funding of the account and for future contributions. The custodian’s state of residence typically determines which state’s UGMA or UTMA laws apply to the account. Some platforms may also require a minimum initial deposit to open the account, though many offer zero minimums.

Funding and Managing Investments

After a custodial account is established, various methods are available for adding funds, including electronic transfers from a linked bank account, direct deposits, or checks. Many platforms facilitate recurring contributions, allowing for consistent investment over time. While there are no contribution limits for custodial accounts, contributions exceeding the annual federal gift tax exclusion amount, which is $19,000 per individual in 2025 ($38,000 for married couples), may be subject to gift tax implications.

The custodian is solely responsible for making investment decisions within the account. This includes selecting specific stocks, bonds, mutual funds, or ETFs, and executing trades. Some platforms offer self-directed investing, while others provide robo-advisor services for an advisory fee. Withdrawals from the account are permissible at any time but must be used exclusively for the minor’s benefit.

When the minor reaches the age of majority, the custodian is legally required to transfer the assets to the now-adult beneficiary. This transfer involves paperwork, and the assets are then held in an account directly owned by the former minor.