You can invest in stocks before 18, but only through a custodial account opened by a parent or guardian

A minor cannot open a brokerage account alone. Instead, a parent or legal guardian opens a custodial account — also called a Uniform Gifts to Minors Act (UGMA) account or Uniform Transfers to Minors Act (UTMA) account, depending on your state — and manages it on your behalf until you reach the age of majority (usually 18 or 21, depending on your state and account type).

The account is legally yours. You own the stocks, bonds, or mutual funds inside it. Your parent or guardian acts as the custodian, meaning they make the investment decisions and handle the paperwork while you are under 18. Once you turn 18 (or 21, in some cases), the account becomes yours to control completely.

Most major brokerages — including Fidelity, Charles Schwab, E*TRADE, and Vanguard — offer custodial accounts. The process is straightforward: your parent or guardian provides their Social Security number and yours, and the brokerage sets up the account in your name with them as custodian.

Key Takeaways

  • A parent or guardian must open and manage a custodial account for you to invest in stocks before 18.
  • You own the investments in the account, but your parent or guardian controls the buying and selling decisions until you reach the age of majority.
  • Custodial accounts are available at most major brokerages with no minimum age for the minor, though some brokerages set their own rules.
  • Money in a custodial account counts as your asset when you file taxes or explore for financial aid, which may affect your tax bill or aid may be able to access.
  • Once you turn 18 or 21 (depending on your state and account type), the account transfers to your full control and your parent or guardian has no further say.

How a custodial account works in practice

Your parent or guardian chooses the brokerage and opens the account online or by phone. They provide their identification and yours. The account is registered in your name — for example, "John Smith, as custodian for Sarah Smith" — so the brokerage knows you are the beneficial owner.

Your parent or guardian then funds the account by transferring money from their bank account or depositing a check. They use that money to buy stocks, exchange-traded funds (ETFs), mutual funds, or bonds on your behalf. You can watch the account grow, learn how the market works, and discuss investment choices with them.

You do not need to do anything to maintain the account. Your parent or guardian receives the statements and handles any paperwork. When dividends are paid or stocks are sold, the proceeds stay in the account unless your parent or guardian withdraws them.

Tax consequences of a custodial account

Income from investments in a custodial account — dividends, interest, and capital gains — is taxed in your name, not your parent's. This can be an advantage if you have little or no other income, because the first portion of investment income may not be taxed at all. The exact amount varies by year, but generally the first $1,250 or so of unearned income is not taxed (this figure changes annually).

Above that threshold, the tax rate depends on your age and total income. If you are under 24 and still a dependent, some investment income may be taxed at your parent's rate instead of yours — a rule called the "kiddie tax." Your parent or guardian should consult a tax professional to understand the specific impact for your situation.

When you turn 18, you become responsible for filing your own tax return if you have investment income. Your parent or guardian will no longer file for you, even if the account is still in their name as custodian.

Impact on financial aid and other benefits

Money in a custodial account is considered your asset, not your parent's. When you explore for federal student aid (using the FAFSA), the value of the account is counted as part of your expected family contribution. This can reduce the amount of aid you receive, because the government assumes you will use your own assets first.

The impact is usually larger than if the same money were in your parent's name. Custodial accounts are assessed at a higher rate than parental assets. If you are planning to attend college and think you may need financial aid, discuss this with your parent or guardian before opening a large custodial account.

When the account transfers to your control

At the age of majority — 18 in most states, 21 in a few — the custodian's role ends. The account automatically becomes yours. Your parent or guardian no longer has the right to make decisions or withdraw money without your permission.

Some brokerages require you to confirm that you want to take control, while others transfer it automatically. Contact the brokerage a few months before your birthday to learn what steps you need to take. Once the transfer is complete, you can buy, sell, or withdraw money as you wish.

Alternatives if your parent or guardian cannot open an account

If your parent or guardian is unwilling or unable to open a custodial account, a few other options exist. Some employers offer 529 college savings plans that allow a parent or guardian to invest on your behalf for education expenses. These have different tax rules and restrictions than custodial accounts.

Another option is a Roth IRA opened by your parent or guardian if you have earned income from a job. A Roth IRA is designed for retirement savings, so the money is meant to stay invested until you are much older, but it does allow you to start investing early and benefit from decades of growth.

If you have a job and earn W-2 income, you can also ask your employer about a 401(k) or similar retirement plan, though most employers do not offer these to teenage workers.

Frequently Asked Questions

Can I invest in individual stocks, or only mutual funds and ETFs?

You can invest in individual stocks through a custodial account. Your parent or guardian can buy any security the brokerage offers — individual company stocks, ETFs, mutual funds, bonds, or a mix. Some brokerages restrict certain types of trading (like options or margin) in custodial accounts, so check the brokerage's rules before opening.

What happens to the money in the account if my parent or guardian dies?

The account is yours, not theirs, so it does not go through their estate. It passes to you as the named owner. If your parent or guardian named an alternate custodian (which some brokerages allow), that person takes over management until you reach the age of majority. Otherwise, the account may be frozen until a court appoints a new custodian or you turn 18.

Can I withdraw money from the account before I turn 18?

Your parent or guardian can withdraw money at any time for your benefit — for example, to pay for school, medical care, or other expenses. However, the money must be used for your benefit, not theirs. If money is withdrawn and not used for you, it may be considered a gift and could have tax consequences. Once you turn 18, you can withdraw money yourself without restriction.

Do I need my own Social Security number to open a custodial account?

Yes. The brokerage needs your Social Security number to open the account in your name and report investment income to the IRS. If you do not have a Social Security number, you will need to obtain one before opening the account.

Can I have more than one custodial account?

Yes. You can have custodial accounts at multiple brokerages, and your parent or guardian can open accounts at different institutions. However, all the accounts are in your name, and the total value counts toward your assets for financial aid and tax purposes. There is no legal limit, but having too many accounts can become difficult to manage.