With the recent trend among millennials, investing ranks first; this brings us to the question – how old do you have to be to invest in stocks? If you are a teenager and start investing today, you will be ahead of your fellow adults in terms of finances by the time you reach adulthood.
Although the crashing economy is always in the headlines due to the pandemic, you must understand that the economy will rebuild itself; you just need to give time. And starting early with the investment, you have a lot of time to invest in.
How Old Do You Have To Be To Invest In Stocks?
Once you have set your mind to ensure the investing market and start calling up brokers to find the optimum time to enter the market, be aware of one thing if you are a minor – You have to be at least 18 to start investing in stocks.
There are many investing apps online that help the user with the stock investment, even if they need confirmation of being 18 to start trading in stocks.
How To Get Around This Roadblock?
If you are a minor and want to invest in stocks, you can use a custodial brokerage account. A custodial account is an account maintained by the parents of the minor. And once you are an adult, you can revert that account to your name.
A Custodial account is created by the parents and then gifted to the child. These custodial accounts can be deposited with a maximum of $15,000. Once the fund is in the account, you can start using the money to trade stocks.
Of course, your parents are the real owner of the custodial account and manage full control over your trade. In fact, they are also responsible for contacting brokers to open the trade.
Things To Consider Before Choosing A Brokerage
Along with knowing how old do you have to be to invest in stocks, you must also consider choosing the right brokerage platform.
Being a minor, there is a possibility that you won’t have an idea of how the whole investing industry works. This is where you will find the need for a broker. Choosing the right brokerage to open your trade plays a significant role in determining the future outcome of your trade.
Here are a few factors that you would like to consider.
1. Minimum Balance Requirements
Every platform needs a minimum balance to start investing in stocks. This minimum balance requirement will vary from platform to platform. Hence, look around to see what platforms are offering a minimum balance that fits your pocket effortlessly.
2. Tools & Resources
If you’re new to the investment industry, you need to have the proper tools and educational resources to ensure that you succeed with the investment. So when you choose a brokerage account, ask them about the tools available with the platform.
Having a platform that is easy to use can make your investment decision easy. The last thing you would like to do is sign up for a platform that is hard to navigate. You are investing your hard-earned money in the stocks; choose a platform that you feel comfortable with.
Finally, always ask about the fees of the platform associated with the brokerage account. No matter what commission you have to deal with, ensure that everything is on the table without any hidden cost.
How To Buy Stocks?
Before you can start investing, the first thing you need to know is how old do you have to be to invest in stocks. Once you know the minimum age requirement, you can move forward with investing in stocks.
Step 1: Check The Age Requirements
Children below the age of 18 cannot directly invest in stocks. Instead, to invest in the stocks, they need a custodial brokerage account that their parents maintain. This method is also known as passive investing. Passive investing is where an adult buys stocks in the name of their child.
Step 2: Select An Online Broker
Choosing the right broiler to open a deal is very important. Look for brokers that offer low maintenance fees and commissions. The more you look in the market, the more options you will get.
Step 3: Research Potential Companies
The next step is to look for the companies that you want to invest in. Before you invest in your favorite company, look at their annual stock market reports. This will give you an idea of their performance and whether it will be wise to buy their stocks.
Step 4: Buy Stocks
When you purchase your first stocks, start with a smaller investment. Tracksuits performance and can gradually increase the number of stocks. We would like you to recommend starting investing with fractional stocks, which cost less than complete stock.
Consider Taxes & Fees
Just because you are minor and investing in the stocks doesn’t mean your account will be exempted from taxation. If you are under 19, here is how your tax liabilities look like.
- The first $1050 of your investment income is tax-free.
- The next $1050 will be taxed at 10%.
- Any investment income increases over $2100; it is taxed at parents’ marginal tax rates or kiddie tax.
The Bottom Line
That is for “how old do you have to be to invest in stocks” despite all the limitations surrounding the minors and investing. This is what I believe – you are never too young or too old to start an investing journey. The early you start investing, the better. This is what makes investing one of the best ways to create wealth over time.