Q: Today’s question comes from Joann. She writes: My 15-year-old granddaughter wants to begin investing. What is a good option to get her started?
A: One of the components of raising financially independent children is teaching them the importance of investing early on. So, kudos to you, Grandma!
Merely talking about investing with the young women in our lives helps build their know-how and confidence. Giving her hands-on experience with stocks — owning a share of a business that makes her favorite movies, breakfast cereal, or shoes — is even better. It’ll set her up to think and act like an investor for the rest of her life.
At this age, giving a young person an investment account she can call her own (aka, a custodial account) is the way to go. (It’s as easy to open as a bank account, and you can do it at a low-fee, low-minimum online discount broker, like Fidelity, or Schwab.)
Money within a custodial account legally belongs to your child (and is taxed at her rate, not yours). But the adult “custodian” (a parent, relative, or non-relative) has trading authority and is responsible for ensuring the assets are managed in the minor’s best interests. Once the child is of age, she gets the keys to the account and can let her rebellious inner day trader take over. (Don’t worry, it’s just a phase.)
If she’s interested in popular stocks, like Amazon or Alphabet (a.k.a. Google), there are ways to invest in them without breaking the bank. Enter fractional shares, which are exactly what they sound like — partial shares of stock you can buy with however many dollars you have to spend. They’re a great first step when it comes to investing for kids, and you can read more about how they work here.
