There are many reasons why teens should invest. The most significant advantage is the time they have to allow their investments to grow and increase in value. Sometimes it might seem confusing where to begin, but it does not have to be. There are many strategies and tools to help young people as they begin their investment journey. In this article, we break down the most important things that teens should know about investing.

KEY TAKEAWAYS

  • People who have not yet reached the age of legal adulthood have various options to begin investing in coordination with a parent or responsible adult.
  • Beginning to invest at a young age provides significant advantages, as investments have a longer time to grow and benefit from the power of compounding.
  • Although many brokerages and trading platforms have age restrictions, there are apps specifically geared toward teen investors.

Some people may have a misconception that investing is off-limits for people who are not yet legal adults. But unlike the casino or the bar, there are no age restrictions on investing. It is true that you generally need to be at least 18 years old to open your own brokerage account, but people younger than that have plenty of options to invest—although they require varying levels of supervision or collaboration with an adult.


People younger than 18 can get an early start on retirement planning through a custodial account. In a custodial account, an adult controls investments on behalf of a minor until they reach 18 or 21 years of age, depending on the state.1 Note that the conditions for different types of accounts may vary by the financial institution providing the service.



The Importance of Investing Early

Beyond just being allowed to invest, younger people have an upper hand—quite simply, the sooner you begin investing, the more time your money has to grow. This early-mover advantage for younger investors is magnified by the power of compounding. As you reinvest your capital gains and interest to generate additional returns, the value of your account can snowball higher, making it even more beneficial to start investing while time is on your side.

A quick example can illustrate the advantages of getting an early start. Let’s say you begin to invest for retirement when you begin your career at age 22. If you consistently set aside $100 per month and earn a healthy 10% return on your investment (compounded annually), you would have $710,810.83 when you reach age 65. However, if you had started investing at age 15, you would have $1,396,690.23, or nearly double the amount