You can invest in stocks under 18, but not directly — a parent or guardian must open and control the account

If you are under 18, you cannot open a brokerage account in your own name. The law treats minors as unable to enter binding contracts, which includes the agreement you sign with a brokerage. Instead, a parent or guardian opens a custodial account — a real investment account that holds actual stocks, but one they manage on your behalf until you reach the age of majority (18 or 21, depending on your state).

The money in the account is legally yours, not your parent's. When you turn 18 or 21, the account transfers to your control and you can buy, sell, and manage it yourself. Until then, your parent can make trades, but they cannot take the money out for their own use — that would be theft.

There are two main types of custodial accounts: the Uniform Gifts to Minors Act (UGMA) account and the Uniform Transfers to Minors Act (UTMA) account. Both work the same way for stocks. The difference is that UTMA accounts can also hold real estate and other property, while UGMA accounts hold only cash and securities. For stock investing, either one works.

Key Takeaways

  • A parent or guardian must open and own the custodial account, but the money and investments inside belong to you.
  • You can buy stocks through a custodial account at most major brokerages, including Fidelity, Schwab, and Vanguard, with no minimum age for the minor.
  • When you turn 18 or 21 (depending on your state), the account automatically becomes yours to control.
  • Money you put into a custodial account counts as a gift, and there are annual limits on how much can be given without tax paperwork, though most families stay well below these limits.
  • Earnings inside the account — dividends and capital gains — are taxed at your rate, not your parent's, which is usually lower.

How to open a custodial account at a brokerage

The process is straightforward. Your parent goes to a brokerage website — Fidelity, Charles Schwab, E*TRADE, Vanguard, and most others offer custodial accounts — and selects the option to open one. They will need your Social Security number, date of birth, and their own identification. The brokerage will ask which state you live in, because the rules for when the account transfers to you depend on state law.

Your parent funds the account by transferring money from their bank account. Once the money arrives, you can both start buying stocks. Some brokerages let you log in and see the account, though your parent controls all trades. Others require your parent to make all trades themselves. Check the brokerage's rules before opening — if you want to be able to place trades yourself, ask whether they allow that for minors.

There is no minimum amount to open most custodial accounts, and no minimum to buy stocks once the account is open. Some brokerages have lowered or eliminated their minimum stock purchase, so you can buy a single share of any company. This means you can start with whatever money you have — $50, $100, or more.

Tax rules for custodial accounts

Money your parent gives you to invest counts as a gift. In 2024, a parent can give you up to $18,000 per year without filing a gift tax return. Most families stay far below this, so you do not need to worry about it unless your parents are giving you very large amounts.

The earnings your investments make — dividends and profits when you sell stocks for more than you paid — are taxed at your tax rate, not your parent's. This is usually a big advantage. If you have little or no other income, your first $1,300 of investment earnings in 2024 is taxed at 0 percent. Above that, you pay tax, but likely at a lower rate than your parent would. Your parent will receive a form called a 1099 each year showing the earnings, and they report it on their tax return.

If the earnings are very high — more than $2,600 in 2024 — there is a special "kiddie tax" rule that can tax some of the earnings at your parent's rate instead of yours. This is rare for teenagers with modest stock portfolios, but it is worth knowing about. A tax professional can explain whether it applies to your situation.

When the account becomes yours

The age at which you take control of the account depends on your state. In most states, it is 18. In a few states — including California, Nevada, and Utah — it is 21. Your parent should ask the brokerage which age applies to your state when they open the account.

When you reach that age, the account automatically transfers to you. You will receive new login credentials and full control. Your parent can no longer make trades or withdraw money. If there are any restrictions on the account — for example, some custodial accounts restrict what you can buy — those restrictions lift when you take control.

You do not have to do anything to make this happen. The brokerage handles it automatically. However, it is a good idea to log in and confirm your contact information is current a few months before your birthday, so you do not miss any notices from the brokerage.

What you can and cannot buy in a custodial account

You can buy individual stocks, exchange-traded funds (ETFs), and mutual funds in a custodial account, just as you would in a regular account. Some brokerages restrict certain types of trading — for example, they may not allow options trading or short selling — but these restrictions are about risk management, not law. Ask your brokerage what is allowed before you start.

You cannot buy stocks on margin (borrowing money to invest) in a custodial account. You can only spend money that is actually in the account. This is a protection for minors, and it is a good one — it prevents you from taking on debt you may not understand.

You also cannot trade during extended hours (before 9:30 a.m. or after 4 p.m. Eastern time on weekdays). Regular market hours are when you can buy and sell. This is a legal requirement, not a brokerage choice.

Alternatives if your parent will not open an account

If your parent is unwilling or unable to open a custodial account, you have limited options. Some employers offer 401(k) plans to teenagers who work, and you can contribute to one if you have earned income from a job. This is not stock investing directly, but it is a way to invest for retirement.

You can also save money in a regular savings account and wait until you turn 18 to open your own brokerage account. This is not investing, but it keeps your money safe and earns a small amount of interest. Many high-yield savings accounts now pay 4 to 5 percent annually, which is a real return while you wait.

Some schools and youth organizations run stock market clubs or simulations where you can practice investing with fake money. This teaches you how stocks work without requiring a real account. It is a good way to learn before you have real money at stake.

Common mistakes parents and teens make

The biggest mistake is treating the custodial account as if it belongs to the parent. It does not. The money is yours, and the parent is a trustee managing it for you. If a parent withdraws money for their own use, that is theft, even if they plan to pay it back. Some parents do this without realizing it is illegal. Make sure your parent understands the rules before opening the account.

Another common mistake is not thinking about what happens when you turn 18 or 21. Some parents are surprised when they lose control of the account. If you and your parent have different ideas about how the money should be invested, talk about it before you take control. You might decide to keep the same strategy, or you might want to change it. Either way, the conversation ahead of time prevents conflict.

A third mistake is opening the account and then forgetting about it. Stocks require attention — not constant attention, but you should review your holdings at least once or twice a year. If you are not interested in managing the account yourself, ask your parent to help, or consider a target-date fund that rebalances automatically.

Frequently Asked Questions

Can I buy stocks if I am 16 or 17?

Yes, through a custodial account opened by your parent or guardian. There is no minimum age for the minor in a custodial account — you can be any age. Your parent controls the account until you reach the age of majority in your state, usually 18.

Do I need a job to invest in stocks under 18?

No. Your parent can give you money to invest. The money counts as a gift, and as long as it is under $18,000 per year, no gift tax return is required. You do not need to have earned income yourself.

What happens to the account if my parent dies?

The account becomes part of your parent's estate and is handled according to their will or state law. If you are still a minor, a court may appoint a new custodian to manage the account until you reach the age of majority. Talk to your parent about what they want to happen, and make sure they have a will in place.

Can I have more than one custodial account?

Yes. You can have one at each brokerage if you want, or multiple accounts at the same brokerage. However, having many accounts makes it harder to track your investments and pay taxes. Most people start with one account at one brokerage.

Do I pay taxes on stocks I buy but do not sell?

No. You only pay tax on earnings — dividends and capital gains (profit when you sell). If you buy a stock and hold it, you owe no tax until you sell it or it pays a dividend. This is true in a custodial account just as it is in any account.