If you did some digging online, you have probably discovered that you need to be at least 18-years old in order to sign any legal document presented to you. However, even if you are a minor, there are still ways that you can invest. The options you can choose from will depend on the state you live in.
This is why you might be wondering – how old do I have to be in order to place money in different things such as stocks or real estate? Luckily for all individuals searching for an answer to this question, this article can help. Let’s take a closer look at the guide that will help you understand the age requirements:
So, What Are My Options?
Generally speaking, you’ll need to be at least eighteen years old in order to start purchasing different things such as real estate or stocks. However, this will most likely vary from one state to the next since some might have requirements that are stricter, and that will require someone to be 21-years old.
Why do you need to be of age? Well, you cannot sign any legal document presented to you if you are a minor. This means that you cannot sign any contract and you cannot spend the funds on your own. However, investing on your own is not the only option if you are a kid or teenager. You can choose to open a custodial account or you can save money with an account that has high yield savings.
Option 01: Opening a Saving Account
If you are not of age yet, you can always choose to open a savings account that has a high-interest rate. Naturally, you also need to be 18 in order to open any type of bank account since you’ll need to sign a lot of documents, however, your legal guardian or one of your parents can open a joint account.
When you choose this option, you’ll co-own the account with your parent and/or legal guardian. Once you turn 18, you can then easily remove your parent from the account or you could close the original account and open a new one. Doing this will grant you access to the money you have saved over the years.
There are also various applications and programs such as loved.com. What does this allow you to do? Well, such platforms allow individuals to spend their funds, even though they are not 18 yet. Now, keep in mind, some platforms do come with a commission fee, however, there are options that do come commission-free.
Option 02: Opening a Custodial Account
For funding as a child or teen, you can also choose to open a custodial account. How does that work? Well, it is relatively simple to understand since it is similar to the aforementioned option. A custodial account is opened by your parent or guardian, and once it is opened, your representative can make the purchases on your behalf.
Once you are of legal age, the account is then transferred to you, and you alone. There are two options that you can choose from the UGMA and the UTMA, and although there differences between the two when it comes to the assets you can use, both allow parents/guardians to buy and save on your behalf until you turn 18 or 21.
If I Start Early On, What Benefits Will I Gain?
If you choose to buy properties/stocks and/or save money on behalf of your children, there are various benefits that you could gain. It is pretty obvious by now that one of the biggest benefits is the fact that they’ll be able to accumulate wealth at a young age and as they are growing up, which can help them later on in their life.
Besides accumulating their wealth early on, it will also teach them some important personal finance lessons and skills, including how to manage their finances, how to use their funds, sell and purchase real estate and/or stocks, as well as what retirement is, and so on.
Are There Any Disadvantages?
Although there are no really big disadvantages when kids or teens are investing, there is one that might impact them later on. When a kid or teen has a custodial account, it will be viewed as an asset, which means that it might hinder them later on, especially when applying for university and financial aid for it.
Are There Some Strategies That I Should Follow?
Yes, there are various strategies that you can choose to follow, including:
- Stocks – one of the first things that you should consider is stocks. Why? Well, it will be an interesting experience for your kid or teen to choose the company or companies that they would like to invest their money into. If lucky, they can watch those organizations grow and distribute their dividend payments.
- Choosing to Place The Money in ETFs or Index Funds – for all beginners these two options might be the most suitable ones since they allow people to invest as much as they want with only one purchase. You’ll still be investing in stocks, but the entire process will be more efficient and suitable.
- Opting For Bonds – for a more traditional option, you can always opt for investing in various bonds. Now, this is not something that is recommended for younger people since the other alternatives outperform bonds, and your kid will need to invest longer, nonetheless, it is suitable because it carries a low risk.
Investing is still an option for individuals that are not yet 18 or 21. Most of the options will require the help of your legal guardian or one of your parents, nonetheless, once you turn 18, you’ll be able to gain access to your funds and/or investments, which means that you can then continue investing in your own.
So, now that you are aware of all the options you can choose from, you might not want to lose any more of your time. Instead, you should return to the beginning of this guide and go through it once again in order to determine which investment option might be suitable for your requirements and needs.