The demographics of retail investing have definitely been changed by the rapid growth of mobile trading applications and zero-commission brokerage models. The democratization of financial markets means that Gen Z, and younger, are more interested than ever in participating in wealth creation mechanisms. However, this increase in market participation by younger people doesn’t mean there isn’t collision between this new digital accessibility and centuries-old legal frameworks governing contractual capacity. This landscape has young aspirants who want to invest asking: how old do you have to be to trade stocks?
While gamified apps and technology lowered the barrier to entry, the stock market still has to follow legal regulations. Every buy or sell order, for example, is a binding agreement. The minimum age for independent participation in financial markets is, therefore, linked to the age of majority, typically 18 years old in the U.S. and most other jurisdictions.
In this article, we will touch on the regulations governing underage trading, the role of custodial accounts, and how young investors can legally get started. If you are a parent or a minor who wishes to start investing or trading, it is crucial to understand these rules to avoid fraud and ensure security.
Driven by contract law, the requirement is that a trader should be at least 18 years old. In most jurisdictions, a minor lacks the capacity to enter binding contracts.
If a broker allowed minors to trade, contracts would be deemed “voidable”, meaning a person under 18 could legally disaffirm a trade that resulted in a loss, creating a nightmare situation for the broker, where it would have to absorb the loss while the minor keeps the profit. To prevent this scenario, brokers require all account holders to be of legal age to start stock trading.
Federal laws require brokers to verify age and identity to prevent money laundering and ensure compliance with regulations. Minors often lack the necessary credit history or independent status to pass these KYC checks (aka, Know Your Customer). This makes the age limit a strict firewall for any brokerage account.
Although 18 tends to be the standard, the age of majority is mostly dictated by local laws.
In the U.S., you generally need to be 18 to open a brokerage account. State laws, however, impact custodial accounts.
Due to differences in risk profiles, age restrictions can actually vary significantly by asset class. Let’s take a look at some of the most noticeable differences.
Stocks are, by far, the most accessible asset for minors via custodial accounts. Brokers offer UTMA accounts for equities and some programs, such as Fidelity Youth Accounts, may allow teens (13-17) to trade publicly traded stocks and ETFs directly under parental supervision.
Crypto exchanges like Coinbase generally enforce an 18+ rule to strict KYC regulations. Although there are no federal laws banning minors from owning crypto, brokers like Robinhood and Fidelity Youth Accounts often block crypto trading for teens in order to protect minors.
Forex trading is directly linked to high leverage and high-stakes scenarios. It is generally off-limits for folks under 18. Minors cannot legally engage in margin trade because they cannot be held liable for debts exceeding their account balance. Demo accounts are the only legal option for underage forex trading aspirants.
Custody accounts offer a path for trading aspirants under 18. These accounts allow a legal guardian to invest on behalf of the minor trader. We have different classes of Custody Accounts. Let’s take a look into then:
If you’re under 18 and can’t open a custodial account, trading simulators can help you practice trading without risking real money. You can start learning by using platforms such as the Investopedia Stock Market Simulator, which provides $100,000 in virtual cash to put your trading plans in practice via real market data. The Wall Street Survival also offer courses and contests to help minors learn how to buy shares and sell them responsibly, besides helping them build knowledge in a variety of subjects involving financial markets and economics.
Trading involves significant financial risk. If you’re young and still doesn’t meet the trading age to start putting money in the market, you should use time as an ally to get educated and fully understand how markets work and the risks they bring.
Platforms like Coursera and Udemy offer a wide range of courses on financial markets that are suitable for high schoolers. If you’re into books, you can read titles such as The Psychology of Money by Morgan House and The Simple Path to Wealth by J.L. Collings to build the knowledge to make your future transition smoothly once you’re ready for real trading activities.
Minor can’t legally bypass these rules without consequences. If you lie about your age when opening an account on trading platforms, you are committing fraud. Brokers will freeze the account upon discovering the discrepancy, especially during the withdrawal, so you end up having your funds locked indefinitely.
Using a parent’s ID to bypass the broker policies regarding age is highly illegal. It exposes the parent to unexpected tax liabilities and can ruin their credit profile. If you misuse one of your parents identity and make a profit in the market, your parent is liable for taxes on that profit without their knowledge or consent.
Here’s a roadmap you can follow until you’re old enough to trade independently:
Although the answer to how old do I have to be to trade stocks is initially 18, you can still start on your path earlier. You can use the benefits of custodial accounts and educational tools to legally access the stock market and gain the most important thing for someone under 18: Knowledge and real-world experience.
Understand that the restrictions regarding age are not a punishment, but a safety measure. They prevent you from entering into contracts you cannot fully understand yet. Your main strength right now is legal avenues like simulators and custodial options. With them, you can master the markets long before you turn 21 years old, giving you a huge advantage compared to your peers.
Can I trade at 16?
No, not independently at least. You need a parent or guardian to open a custodial account or a Fidelity Youth Account for you.
What happens if I lie about my age?
Lying about your age is a terrible move. Your account will likely be frozen, and you may lose access to your money. It is a violation of the broker terms and constitutes fraud.
Do I need parental permission at 18?
Generally, no. However, if you live in a state where the age of majority is 19 or 21, you may still face restrictions.
When exactly does control of a custodial account change?
It depends on state law, typically occurring at age 18, 19, or 21. The custodian must transfer the assets to the beneficiary at this time.
What alternatives are available in countries without custodial accounts?
In the UK, the Junior ISA allows tax-efficient investing. In Australia, informal trust accounts are common.
