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In case your kid is interested in trading stocks, but he is under 18, it is not a reason to abandon that idea. Below, we will tell you how to introduce your child to investing within the frame of the law and which tools he can get access to.
According to the law, in the USA, only adults at the age of 18 and older can own stocks, bonds, and other assets. Consequently, teenagers and children under 18 cannot buy, sell, or invest in such products. Yet, there is an easy solution, which can help you circumvent these restrictions.
Luckily, you as a parent or guardian have the right to open a custodial account for a teenager and help him or her start a career in trading. In real practice, the answer to the question “How old do you have to be to buy stocks?” is “Any age”. It is up to you as a parent to decide when your child is ready for investing.
Now, let us discuss available custodial account options:
*Uniform Gift to Minors Act. This type is intended for investing in stocks, mutual funds, bonds, and cash. Both a teenager and his relatives (or guardians) can send deposits to it. But those contributions cannot be returned afterward for the sake of the child’s security. Also, there are no annual deposit limits.
*Uniform Transfers to Minors Act. The biggest difference from the previous type is a wider range of assets available. Such accounts allow holding any property, like cars, real estate, land plots, art pieces, etc.
*Roth IRA. These are retirement accounts, as you know, but you can open them for teens as well in case they have some taxable income. But take into account that there are annual income limits ― about $6,000.
Luckily, such accounts for teenagers are available on most brokerage platforms, the main point is to make sure that the service chosen does not charge any commissions for trading and does not demand making a big initial deposit or holding a large sum on the balance.