How to Start Investing as a Teenager (Even if You're Under 18)
Starting your investment journey as a teenager might seem impossible, but it’s actually one of the smartest financial moves a young person can make. Teen investing has become increasingly accessible, and with the right approach, even minors can begin building wealth for their future. This comprehensive guide will show you exactly how to navigate the world of underage investing, from understanding legal requirements to making your first investment.
Why Start Investing as a Teenager Is So Powerful
The biggest advantage young investors have isn’t money—it’s time. By choosing to start investing young, you gain access to finance’s most incredible wealth-building force: compound interest. This section explores why becoming an early investor sets you up for incredible financial success.
The Power of Compound Interest
Compound interest stands as one of the most powerful wealth-building concepts in all of finance, and there’s an excellent reason why. When you invest money, you generate returns not only on your initial investment, but also on every dollar of profit you’ve previously earned. This phenomenon creates an accelerating growth pattern that builds momentum over decades.
Consider this: if you invest $1,000 at age 16 with an average annual return of 8%, that money will grow to over $21,000 by the time you’re 65—without adding another penny. This demonstrates how compounding returns can transform small investments into substantial wealth.
How $10 Today Can Grow into Thousands
Let’s make this even more relatable. Picture having $10 ready to spend in your wallet. You could spend it on fast food, or you could invest it. If you choose to invest that $10 and earn an average 10% annual return, here’s what happens:
- After 10 years: $26
- After 20 years: $67
- After 30 years: $175
- After 40 years: $453
That single $10 investment becomes nearly $500 just by sitting in the market. Now imagine if you invested $10 every month as a teenager—the numbers become truly staggering.
Building Financial Habits Young
Starting your investment journey early isn’t just about money—it’s about developing the right investing mindset. When you begin as a beginner investor, you learn crucial lessons about financial discipline, delayed gratification, and long-term thinking. These wealth-building habits become foundational skills that benefit you for decades to come.
Young investors who start early develop a natural understanding of market volatility, risk management, and the importance of staying consistent with their investment strategy. They learn to see market dips as opportunities rather than disasters.
Are You Legally Allowed to Invest as a Teen?
One of the most common questions about teen investing is whether it’s even legal. The good news is that minors can absolutely invest—they just need to follow certain rules and often require parental consent.
Is It Legal to Invest at 13, 16, or 17?
Yes, it’s completely legal for teenagers to invest, regardless of whether you’re 13, 16, or 17. However, there are some important legal aspects to understand. Most brokerage firms require you to be 18 to open a standard investment account on your own, but this doesn’t mean you can’t invest as a minor.
The key is understanding minor’s investment rights and how they work within the current regulatory framework. SEC regulations for minors are designed to protect young investors while still allowing them to participate in the markets.
What If You Don't Have Parental Support?
While parental consent typically makes teen investing much easier, some young people may not have supportive parents or guardians. In these cases, you might wonder: “Can I open an account without parents?” The answer is more complex but not impossible.
Some platforms offer limited investment opportunities for minors without direct parental involvement, though these are often restricted to educational tools like stock simulators or investment trackers. In most cases, you’ll need to wait until you turn 18 or work on building family finance communication.
Understanding Custodial Accounts
The most common solution for teen investing is opening a custodial account. These are guardian-managed accounts where an adult (usually a parent) maintains legal control until you reach the age to start investing independently in your state.
There are two main types of custodial accounts:
- UGMA accounts (Uniform Gifts to Minors Act)
- UTMA accounts (Uniform Transfers to Minors Act)
Both allow minors to own investments while having an adult manage the account. The main difference is that UTMA accounts can hold a wider variety of assets and may have different age requirements depending on your state.
Best Investment Options for Teenagers in 2025
Not all investments are created equal, especially for young investors. Here are the best investments for teens looking to build their first portfolio.
Stocks and ETFs
Individual stocks and ETFs (Exchange Traded Funds) are excellent choices for teen investors who want to learn about specific companies and sectors. ETFs are particularly attractive because they offer instant diversification—instead of putting all your money into one company, you’re buying a piece of hundreds or thousands of companies.
For beginners, consider starting with broad market ETFs that track the S&P 500 or total stock market. These provide exposure to the entire market without requiring you to pick individual winners and losers.
Index Funds
Index funds share many similarities with ETFs while having distinct structural differences. They’re perfect for implementing a buy and hold strategy because they automatically diversify your investments across many companies. Index funds are ideal for beginners because they require minimal management and have historically provided solid long-term returns.
Many successful investors, including Warren Buffett, recommend index funds as the foundation of any investment portfolio. They’re particularly well-suited for young investors who want to set up their investments and let time do the heavy lifting.
Bonds (and Why They're Not So Cool for Teens)
While bonds for beginners are often recommended as “safe” investments, they’re generally not the best investments for teens. Bonds typically provide lower returns than stocks, and when you have 40+ years until retirement, you can afford to take on more risk for potentially higher returns.
However, understanding bonds is still important for your financial education. Think of bonds as loans you give to companies or governments—they pay you interest over time and return your principal when the bond matures.
Crypto (With Caution)
Cryptocurrency for teens is a hot topic, but it requires extreme caution. Although crypto offers excitement and profit potential, it comes with tremendous volatility and significant risk factors. Most financial advisors recommend that cryptocurrency should represent no more than 5-10% of your total investment portfolio.
If you’re interested in crypto, make sure you understand the investment risks and only invest money you can afford to lose completely. Think of cryptocurrency investments as highly speculative rather than conventional long-term investing
Investing in Yourself (Courses, Skills, Side Hustles)
One of the most valuable investments you can make involves developing your own skills and knowledge. This might mean taking online courses to develop valuable skills, learning about personal finance, or starting a side hustle that generates passive income.
Investments in education and skill development often provide the highest returns of all, especially for young people who have decades to benefit from improved earning potential.
5-Step Guide to Start Investing as a Teen (Beginner Roadmap)
Ready to begin your investment journey? Use this investment roadmap to start investing online with confidence and security.
Step 1: Learn the Basics (Free Resources)
Before investing a single dollar, spend time on financial education. Understanding stock market basics, risk-return tradeoff, and asset allocation will help you make smarter decisions. There are countless free resources available online, from YouTube channels to financial literacy websites.
Focus on learning about diversification, dollar-cost averaging, and the importance of having clear investment goals. The more you understand before you start, the better prepared you’ll be to handle market ups and downs.
Step 2: Choose Your Goals
What are you investing for? College? A car? Long-term wealth building? Your investment goals will determine your strategy. Setting clear financial milestones helps you stay motivated and choose appropriate investments.
For most teens, the goal should be long-term wealth building. With your long time horizon, you can afford to invest in growth-oriented assets that might be too risky for someone nearing retirement.
Step 3: Ask for a Custodial Account (or Use App Alternatives)
This is where you’ll need to have that important family finance talk with your parents or guardians. Explain what you’ve learned about investing and why you want to start investing. Many parents are supportive once they understand their teen’s commitment to learning about money.
Research teen-friendly finance apps and custodial investing platforms together. Some popular options include apps specifically designed for family finance management and teen brokerage accounts.
Step 4: Make Your First Investment
Start small—you don’t need much money to begin. Many platforms now offer fractional shares, meaning you can invest with $100 or even less. What matters most is taking that first step to start investing, regardless of the amount.
Consider beginning with a broad market index fund or ETF. This gives you instant diversification and exposure to the overall market’s growth.
Step 5: Track, Learn, and Adjust
Use investment trackers and budgeting tools to monitor your progress. Review your investments regularly, but don’t obsess over daily fluctuations. The stock market goes up and down in the short term, but historically trends upward over long-term periods.
Continue learning and adjusting your strategy as you gain experience and your financial situation changes.
What Should You Know Before You Start?
Before diving into investing, there are some crucial concepts every teen investor should understand.
Risk vs. Reward: Realistic Expectations
Grasping the risk-return tradeoff serves as the foundation of smart investing. As a basic principle, investments offering higher potential returns typically come with elevated risk levels. Stocks might give you better long-term returns than savings accounts, but they also fluctuate more in value.
Don’t expect to get rich quick. Real wealth-building takes time, patience, and consistency. Anyone promising guaranteed high returns is probably trying to scam you.
Diversification = Less Drama
Diversification becomes your greatest ally as a young investor. Instead of putting all your money into one stock or sector, spread it across different types of investments. This strategy minimizes your risk since when one investment underperforms, others may deliver strong results.
View diversification as spreading your investments across multiple opportunities rather than concentrating everything in one area. A well-diversified portfolio might include stocks from different industries, different countries, and even different asset classes.
Patience and Long-Term Thinking
Successful investing requires patience and long-term thinking. The stock market can be volatile in the short term, but over decades, it has consistently trended upward. Your job as a young investor is to stay the course and not panic when markets get bumpy.
Resist the urge to frequently trade based on daily headlines or emotional reactions. This kind of emotional investing typically leads to poor returns.
What Would Warren Buffett Do?
Warren Buffett, one of the world’s most successful investors, advocates for simple, long-term investment strategies. His advice for young investors is typically to invest in low-cost index funds and hold them for decades.
Buffett’s approach emphasizes buying quality investments and holding them for the long-term, rather than trying to time the market or chase hot trends.
Best Apps and Platforms for Teen Investors
Technology has made investing more accessible than ever for young people. Here are the best investment apps for teens you can try.
Top Custodial Investing Apps
Several investing apps for teens have emerged that make it easy for minors to start investing with parental oversight. These custodial investing platforms typically offer educational resources, fractional shares, and user-friendly interfaces designed for beginners.
Look for platforms that offer low fees, educational content, and strong security features. Many of these apps also include features for co-managing portfolios between parents and teens.
Virtual Stock Games to Practice First
Before investing real money, consider trying stock simulators. These games let you practice trading with virtual money, so you can learn how the market works without risking your actual cash.
Stock market simulation games are perfect for understanding how different investment strategies work and getting comfortable with market volatility before putting real money on the line.
Budgeting Tools for Teens
Good investing starts with good budgeting. Several budgeting tools are designed specifically to help teens track their spending, set savings goals, and understand where their money goes each month.
These tools help you identify money you could potentially invest and develop the financial discipline necessary for successful long-term investing.
How Parents Can Support Teen Investors
Parents play a crucial role in helping their teenagers develop healthy teen financial habits and investment knowledge through parent-teen investing partnerships.
Talk About Money Openly
The best thing parents can do is create an environment where money conversations are normal and encouraged. Family finance talks should cover everything from budgeting to investing to understanding the family’s financial goals.
When parents are open about money, teens learn that financial planning is a normal part of adult life, not something to be feared or avoided.
Co-Create a Small Portfolio Together
Consider starting with a small joint portfolio that you manage together. This hands-on approach to financial mentorship allows teens to learn while having guidance from experienced adults.
Parents can help explain market movements, discuss investment decisions, and provide context that helps teens understand the bigger picture of portfolio building.
Set Limits and Goals Without Pressure
While it’s important to set some boundaries around teen investing, avoid putting too much pressure on performance. The goal is education and habit formation, not necessarily maximizing returns in the short term.
Consider implementing matching contributions where parents match a portion of what their teen invests, similar to how employer 401(k) matches work. This approach helps build generational wealth through family cooperation.
FAQs About Teen Investing
Can I lose all my money?
While investment risks for teens exist, losing all money is highly unlikely with proper strategy. Diversification and focusing on index funds or ETFs help manage risk. Market volatility is normal, but a buy and hold strategy typically protects beginner investors from major losses over time.
Can I invest money as a minor?
Yes, minors can invest money through custodial accounts with parental consent. Parents need to open a minor investment account using custodial investing platforms or traditional brokers. Many investing apps for teens now offer these options, making parent-teen investing easier to start.
Should I invest or save as a teen?
The choice between investing vs saving depends on goals, but teen investing offers significant advantages. While saving provides security, investing allows compound growth that helps beat inflation over time. Early investors benefit from long time horizons, making them ideal candidates to start investing young and build long-term wealth.
Is $100 enough to start investing?
Absolutely! You can invest with $100 thanks to fractional shares offered by many platforms. The key is to start small grow big through consistent investing and compound interest. Many teen-friendly finance apps and robo-advisors for beginners make it easy to begin building wealth with small amounts.
Can 16 year olds invest in stocks?
Yes, 16 year olds can invest in stocks, but they need parental consent and a custodial account. Since minors cannot legally open accounts independently, parents must set up UGMA/UTMA accounts or use teen brokerage account options. This allows underage investing while meeting legal requirements.
Final Thoughts: Start Small, Think Big, Learn Forever
Starting your investment journey as a teenager is one of the smartest decisions you can make for your financial future. Remember, the goal isn’t to become a millionaire overnight—it’s to develop good teen financial habits, learn about money, and harness the incredible power of compound growth over time.
Your teenage years are the perfect age to start investing and building generational wealth. Even small amounts invested consistently can grow into substantial sums over the decades ahead of you. The key is to start small with what you have, keep learning, and stay consistent.
Don’t let the fear of making mistakes prevent you from starting. Every successful investor has made mistakes along the way—what matters is learning from them and continuing to improve your investment strategy.
Most importantly, remember that investing is a marathon, not a sprint. Focus on building good habits, understanding the fundamentals, and thinking long-term. Understanding the time value of money and developing wealth-building habits now will serve you throughout your entire life.