Best Investing Accounts For Teenagers Under 18
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Best Investment Accounts and Options for Teenagers Under 18
- Opening an investment account as a minor can be challenging due to laws and regulations.
- The best option is to use a custodial account, which can be opened by a parent or guardian on behalf of the teenager.
- A custodial account allows for investments in stocks, bonds, mutual funds, ETFs, and more.
- Parents or guardians can gift up to $15,000 per year to the custodial account without incurring gift taxes.
- The money in the custodial account belongs to the teenager and will be transferred to a regular investing account when they turn 18 or 21.
- Using an IRA, specifically a Roth IRA, is a recommended option for teenagers opening a custodial account.
- Roth IRA offers several benefits, but further details can be found in a separate video.
Best Custodial Account Options for Young Investors
- Using a Roth IRA at a young age can provide tax advantages in the long run.
- Opening an IRA within a custodial account is a suggestion for young investors.
- Major brokerages typically offer custodial account options.
- Charles Schwab's custodial account provides access to a wide range of investments with no minimum balance requirements or monthly fees.
- Charles Schwab also offers target date funds for passive risk management.
- TD Ameritrade has excellent college savings options, including custodial accounts marketed as educational savings vehicles.
Options for Custodial Investment Accounts
- Charles Schwab and TD Ameritrade offer custodial accounts with no minimum balance requirements and zero commission trades.
- Acorns provides a custodial account option called Acorns Early, which is a passive investing platform that automates the investment process.
- Acorns Early falls under a UTMA or UGMA account, similar to a 529 college savings plan but with no restrictions on how the money can be used.
- Acorns requires a monthly fee of $5 for access to their suite of investing tools and Acorns Spend, a hybrid bank account.
- Starting a custodial account at a young age can have long-term benefits due to compound interest and time.
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Opening an Investment Account as a Minor: Tips and Options
- Use a custodial account, opened by a parent or guardian on behalf of the teenager.
- Custodial accounts allow for investments in stocks, bonds, mutual funds, ETFs, and more.
- Parents or guardians can gift up to $15,000 per year to the custodial account without incurring gift taxes.
- Money in the custodial account belongs to the teenager and will be transferred to a regular investing account when they turn 18 or 21.
- Consider using a Roth IRA within a custodial account for tax advantages.