Teens

How do I Invest if I'm Not 18 or An Adult Yet?

To invest before you turn 18, or reach adulthood, try looking into custodial accounts! Make sure to pickup these four key investing principles and understand the pro's and con's of investing early on.

5 min read
November 13, 2022
To invest before you turn 18, or reach adulthood, try looking into custodial accounts! Make sure to pickup these four key investing principles and understand the pro's and con's of investing early on.

Key Points

  1. In the United States, an individual must be at least 13 to start investing with a custodial account
  2. There are less contribution restrictions on custodial accounts, compared to College 529s and Roth IRAs
  3. Investing before 18 can build confidence before you start paying your own bills
  4. Introducing daily exposure to financial education, with apps like Bloom.
  5. 4 things to learn about before investing: Diversification, Patience, Value Investing and ETFs

Investing is a great way to build financial independence while learning about money, investing, companies and the world! Warren Buffett bought his first stock in a company at age 12 and it helped him learn principals to make him one of the greatest investors of all time.

1) How old do you have to be to invest?

In the United States, you can legally start investing as soon as you turn 13, if you are using a custodial account. Custodial accounts let minors start investing with the approval of a parent, or legal guardian over the age of 18 and with the legal ability to invest in the United States.

2) Restrictions for investing under 18?

First of all, due to advertising regulations for children under 13, you need to be at least 13 for most teen investing services.

Unlike a Roth IRA, or College 529, there is no contribution limit and the investment profits can be used for anything!

Taxes are applied to the teen if they make over $1,050 (in most states). Unless the teen makes over ~$40k/year, there is no capital gains tax, or taxation on each buy/sell.

The teen has the right to make all investing decisions. Some services and parents might decide to set their own restrictions on order approvals, crypto and other situations.

With Bloom, a teen can connect their own bank account or debit card to invest their own money.

3) Is investing before 18 a good idea?

Different things work for different families! In general, like with learning any new skill, feeling confident and comfortable can take some time.

In the world of finance, you may find it beneficial to start learning before you are living on your own, paying bills and balancing an income.

Starting under the safety net of a parent or relative can be amazing!

4) Learning is important - what’s the best way to pick up investing?

  1. Join or create an investing club at your high school
  2. Consider researching investing and finance online
  3. Look into different investing books

The goal is to make learning a part of your daily routine!

Apps like Bloom also teach teens personal finance and investing in a fun and easy way! Bloom breaks down difficult concepts into exactly what you need to know in the format of Instagram Stories.

Instead of swiping through social media, teens can swipe through personal finance skills.

5) Four Key Investing Principles

Children may learn a lot about the businesses and industries that make up their portfolio by learning about stocks, which can be a terrific method to help them understand the world. Additionally, it's a fantastic method to teach children about patience and diversification because, despite market ups and downs, historically speaking, long term trends have always been upward.

Diversify

Invest across different companies and industries! This way, you get exposure to more opportunities and if one fails, you have other investments to back it up.

Be Patient

Stocks vary from day to day, week to week and even month to month. Long term patterns matter more. Long term investing and compound interest can work together to maximize your wealth!

Focus on Value Investing

Take a piece of advice from Warren Buffet and try to invest in companies that bring true value. Research companies when they are young, innovative and impactful.

ETFs Can Do the Job For You

ETFs, or bundles of stocks sold as one (like an egg carton!), are assembled by investing professionals. There are ETFs for different industries, locations and even company sizes. One of the most popular ETFs is $SPY/$VOO which tracks the S&P 500 Index, the top 500 US companies in the stock market.

Media Contact

Allan for Bloom

allan@joinbloom.co

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