How Old Do You Need to Be to Invest in Stocks?
How old do you need to be to invest in stocks? This is a question that many young Americans are considering. In fact, the stock market can be a great way to earn passive income. And the demographics are starting to evolve as the stock market continues to make headlines.
How Old Do You Need to Be to Invest in Stocks Right Now?
Amid the coronavirus pandemic, younger people began investing in stocks. According to CNBC, this was a “generational-buying moment” that may last well beyond the pandemic. Even Charles Schwab CEO Walt Bettinger said the broker saw “monumental volumes” of trading due to new accounts in the first quarter of 2020. Charles Schwab added over 609,000 accounts that quarter.
So younger people are investing in much larger numbers than the generation before them. But this presents a long list of novice investors looking for answers. And for good reason.
So, how old do you need to be to invest in stocks? Specifically, most brokerages require you to be a minimum of 18 years old in order to open an account in your name.
This is the set standard. However, there are ways to begin saving and investing in your child’s name.
For example, you may want to consider a custodial account. This is possible through a Uniform Gift to Minors Act (UGMA) account or a Uniform Transfer to Minors Act (UTMA) account.
In most states, minors do not have the right to own stocks, bonds, mutual funds, annuities or life insurance policies. In addition, parents cannot simply transfer assets to their children. Instead, you must transfer the assets to a trust, such as a UGMA or UTMA account.
How to Create a Custodial Account
Many brokers offer investors the ability to open a custodial account. The most popular include:
How old do you need to be to invest in stocks right now? A custodial account is a workaround for parents that want to begin investing and saving for their children’s future.
To open the account, you will need to provide the name and Social Security number of the minor and appoint a custodian. The custodian, in most cases, is the child’s parent or the person that created the account.
The custodian has the fiduciary responsibility to manage the assets. And the money belongs to the minor, but will be managed by the custodian until the child reaches the age of trust termination. Moreover, any money in the account for which you are the custodian will be counted as part of your taxable estate.
A New Generation of Investors
As you can see, the stock market is reaching young people more than ever before. And there are plenty of investment opportunities to consider for your portfolio.
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How old do you need to be to invest in stocks? Most brokerages require account holders to be at least 18 years old, but a custodial account is perfect for parents who are looking to invest for their children’s future.