Start Investing Young: A Beginner's Guide to Getting Kids into the Market

There’s a reason everyone keeps saying “start investing early”—and it’s not just motivational fluff. The math is crystal clear: the younger you begin, the more compound interest works in your favor. A $1,000 investment at age 13 can turn into serious wealth by retirement just through the power of compounding alone.

The Legal Reality: How Old Do You Need to Be?

Here’s the straight answer: You need to be 18 to open a brokerage account solo. But that doesn’t mean kids and teens are locked out.

If you’re under 18, you have three solid options:

Option 1: Joint Brokerage Account

• Who decides what to buy? Both the kid and the adult
• Who owns it? Both of you
• The flexibility: Most flexible option out there—you can invest in almost anything
• The catch: The adult handles tax obligations

Think of it like a shared wallet where the kid gradually learns to make investment calls.

Option 2: Custodial Brokerage Account (UGMA/UTMA)

• Who decides? The adult (parent/guardian)
• Who owns it? The kid
• The benefit: Tax advantages through the “kiddie tax” provision
• The twist: When the kid hits 18-21 (depending on state), they get full control

Perfect for parents who want to invest for their child while they’re learning.

Option 3: Custodial Roth IRA

• Requirement: The kid needs earned income (summer job, tutoring, etc.)
• 2024 limit: Up to $7,000/year or their earned income, whichever is less
• The magic: Grows completely tax-free, forever

Imagine putting $7,000 at age 15 and watching it compound tax-free for 50+ years. That’s the real power move.

What Should Kids Actually Invest In?

With decades ahead, go for growth. Here are the three easiest starting points:

Individual Stocks: Own a piece of real companies. Learn about the business, follow the news, understand why it wins or loses. More exciting, more educational, more risk.

Mutual Funds: A basket of dozens or hundreds of stocks mixed together. If one stock tanks, it barely dents your portfolio. Safer play for beginners.

ETFs (Index Funds): Like mutual funds but cheaper (passively managed) and they trade like stocks. Best pick for teens who want broad market exposure without overthinking it.

The Real Question: Why Start Young?

Compounding is your superpower. $1,000 invested at 4% APY:

• After Year 1: $1,040
• After Year 2: $1,082
• After Year 10: $1,480
• After Year 30: $3,240

That extra $2,240 is pure math, not effort.

You’ll actually build habits. If investing becomes part of your routine at 15, it’s just normal by 25. By 45, you’re wealthy because of compounding and consistency.

You can ride out volatility. Markets crash. They recover. If you’re 16 and the market drops 30%, you have 50 years to watch it bounce back. If you’re 60? Different story.

Bottom Line

You don’t have to wait until 18. Open a joint or custodial account, pick index funds or a few solid stocks, and let time do the heavy lifting. The difference between starting at 15 vs. 25 is literally hundreds of thousands of dollars by retirement. That’s not hype—that’s compound math.