Opening Your First Brokerage Account
How a US teenager actually gets an investing account, who has to co-sign it, and what to look for before you click anything.
Know which account type you’re allowed to open
In the US, you generally cannot sign a brokerage agreement until you’re 18. Contracts aren’t enforceable against minors, so brokers won’t take the risk. What they’ll do instead is open a custodial account with an adult on the paperwork.
If you’re 16 or 17 with a paycheck, a licence and money you’re deliberately not spending on a car, this is the version of investing actually available to you. Not a training-wheels version: same market, same order buttons, same tax paperwork, and the same 30% Tuesday that adults have to sit through. The only difference is whose signature is on the form.
Two flavours, and the difference is real:
- UGMA (Uniform Gifts to Minors Act) holds financial assets - cash, stocks, funds.
- UTMA (Uniform Transfers to Minors Act) is the newer version and also allows other property. Most brokers default to UTMA where both exist.
Don’t overthink which one you get; the broker offers what your state supports and the choice is mostly made for you. What matters is understanding what you’re agreeing to: once money goes into that account, it belongs to you, the minor - not to the parent who deposited it. That single fact drives most of the arguments on this page.
If you have a part-time job with actual reported earnings, a custodial IRA may also be open to you, and it carries a tax advantage a UTMA doesn’t. The catch is genuine: contribution room is capped at your earned income for the year, so it takes a W-2 or documented self-employment income to use properly.
What you cannot do: open a standard individual account, day-trade on margin, or trade options in a custodial account at most brokers. Those need either age or an approval process you won’t clear at 16.
Pick the adult who will be custodian
This is the step people skip and regret.
The custodian isn’t a witness or a signer of convenience. They hold legal control of the account, decide when to sell, and manage it in your interest until the age of termination - when the account legally becomes fully yours to control. That’s commonly 18, sometimes 21, and it varies by state and whether it’s UGMA or UTMA. Check your own state rather than assuming.
Practical consequences worth raising before anyone opens anything:
- Money from a grandparent’s gift goes in, and it is now legally the kid’s asset.
- The custodian can spend it on the minor’s benefit, but not on their own bills.
- If the relationship sours, unwinding a custodial account is slow and awkward, because the money was never really the custodian’s to give back.
A parent or guardian is the normal pick, mostly because they already handle the kid’s finances. It does not have to be a parent - it just has to be someone who will still be reachable and reasonable in five years.
Compare brokers on fees and minimums, not app design
Zero commissions on stock trades stopped being a differentiator some years ago. It’s the floor. The things that actually vary between brokers for a teenager:
| Question | Why it matters |
|---|---|
| Do they offer minor/custodial accounts at all? | Several popular apps don’t. Eliminates half the list immediately. |
| Is there an account minimum? | Some want $500-$2,500 to start or waive fees only above it. |
| Fractional shares? | Without them, a $700 share is out of reach on $50 saved. |
| Inactivity fee? | A monthly charge for not trading quietly eats a small account. |
| Automated recurring buys? | Investing $20 weekly should be one setting, not a chore you forget. |
Ignore the app’s animations and confetti. Confetti on a purchase screen is a design choice aimed at making you click more, not at making you wealthier.
If the fee columns blur together, how a broker actually makes money covers which charges are normal, which ones quietly drain a small account, and what “free” is paid for.
Name brands where they belong, then judge them yourself. The long-established full-service firms – Fidelity, Charles Schwab, Vanguard – all support custodial accounts, and some of them also run supervised accounts aimed at younger teens. Several of the apps your friends screenshot positions from will not open an account for a minor at all, which is exactly why “do you even do this” is the first question and not the last. Product lines change and marketing pages lie by omission, so confirm on the firm’s own site rather than trusting this sentence or a YouTube review.
Two legitimate ways to research a broker before trusting it with your Social Security number: look it up on FINRA’s BrokerCheck, and confirm it’s a member of FINRA/SIPC. If a company can’t be found on BrokerCheck, stop.
Open it together
Roughly what the process looks like, though each broker words it differently:
- The custodian starts the application on their own device, logged in as themselves, then adds the minor as beneficiary. Both of you will typically need full legal names, addresses, and Social Security numbers.
- Identity documents get requested for the custodian - photo ID, sometimes proof of address.
- Funding comes from a bank account in the custodian’s name. Debit cards often work; the transfer usually takes a few business days rather than being instant.
- The broker reviews and approves. Some approve in minutes, some take several days, and a handful still mail paper forms to sign.
Budget an evening, not ten minutes. And read the account agreement section on the age of termination while you’re there - it’s two sentences and it determines when you get control.
One thing to raise out loud with the adult: contributing meaningfully to a custodial account can affect federal financial-aid eligibility for college, because assets held in the student’s name are assessed harder than assets held by the parents. Not a reason to avoid investing - a reason to know before dumping $20k into it.
Decide what the first purchase actually is
Once it’s funded, resist the urge to buy whatever you saw recommended online.
For a first position, a broad total-market index ETF does the same mechanical exercise - search the ticker, choose order type, set quantity, review, submit - with far less downside if your instincts are wrong. You learn the exact same interface buying one fund as you would buying three speculative names. If you want to know what you’d actually be owning, index funds: set it and forget it covers the product itself.
Order type note: use a limit order on anything thinly traded. A market order guarantees the trade happens, not the price, and on a quiet stock that gap can be real money. On a huge, heavily-traded index fund it barely matters.
Start with a number you’d genuinely be fine watching drop 30%. If you couldn’t sleep through that, the position is too big regardless of how good the investment is - sizing is a skill, and practising it on $50 is much cheaper than learning it on $50,000.
Nothing here is a recommendation to buy any particular security, and this isn’t financial advice. It’s an explanation of the mechanics so you can have an informed conversation with the adult who has to co-sign, and ask decent questions of whichever broker you choose. For anything touching taxes, gifts, or college savings specifically, that’s a question for a qualified professional - typically a CPA - rather than a website.