Tips for choosing the best brokerage account for teens

Parents & guardians · Tips · Updated October 1, 2026 · LearnLife Editorial

What is a custodial brokerage account, and why does it suit teens best?

A custodial brokerage account is a special type of investment account opened by an adult—usually a parent or guardian—on behalf of a minor. Legally, minors can’t open brokerage accounts on their own, so custodial accounts give teens a chance to invest with adult supervision. The adult custodian controls the account until the teen reaches the age of majority, which varies by state, often 18 or 21.

To open a custodial account, parents provide their own and their child’s personal information, including Social Security numbers and identification. The custodian manages trades and fund transfers but can involve the teen in decision-making to teach responsibility. Custodial accounts allow teens to learn investing basics without risking access to funds too early.

For example, if a parent wants to help their 15-year-old start investing, they would open a custodial account through a brokerage firm, deposit some money, and then let the teen research and suggest stocks or funds to buy. The parent executes the trades but discusses results regularly. This set-up offers protection, legal compliance, and educational value all in one.

How can parents select a brokerage platform tailored to teens’ needs?

Choosing the right brokerage platform is essential to keep teens engaged and comfortable. Look for brokerages that offer custodial accounts with:

• No or low fees on trades or account maintenance
• No minimum deposit or balance requirements
• User-friendly mobile apps and websites with simple navigation
• Educational resources like videos, articles, and tutorials designed for beginners
• Features such as fractional shares, which let teens buy portions of expensive stocks

Start by creating a shortlist of brokerages that meet these criteria. Then try demo or practice accounts if available. Have your teen explore the platform’s tools and ask questions like: “Can I easily search for companies?” or “Is it simple to track my portfolio’s value?”

For instance, some brokerages clearly label educational sections, show easy-to-understand charts, and provide alerts for significant market changes. Others offer guided investment options or robo-advisor services that suggest diversified portfolios for beginners. You might say to your teen, “Let’s test this app together and see how easy it is to look up companies you’re interested in.”

When your teen feels ready, open the custodial account and start with a small deposit. Choosing a platform your teen enjoys will increase the chances they engage consistently.

How should parents introduce teens to investing concepts step by step?

Teaching teens investing concepts works best with simple language and practical examples. Start by explaining these core ideas:

1. What is a stock? Say: “Owning a stock means you own a small part of a company.”
2. What is a bond? Explain: “A bond is like lending money to a company or government, which pays you interest.”
3. Why invest? Highlight: “Investing helps your money grow over time to reach goals like college, a car, or a trip.”

Use real-world analogies, such as comparing buying a stock to owning a slice of pizza—you share in the taste and risk.

Next, involve your teen in researching companies or ETFs (exchange-traded funds) they know. For example, if they like a brand or technology, look up that company’s stock together. Ask questions like, “What does this company do? Do you think it will grow?”

Encourage your teen to practice with small investments or simulation apps before trading real money. For example, start by investing $50 in a diversified ETF that tracks many companies, explaining how this spreads risk. Check the portfolio monthly and discuss how the value changes, reinforcing that investing involves ups and downs.

What investment types are best for teen brokerage accounts?

For teens new to investing, diversified, low-risk options are ideal:

• ETFs and Index Funds: These funds hold many companies and track a market index. They reduce risk by spreading investments, making them easier to manage.
• Fractional Shares: Buying small portions of expensive stocks lets teens invest in popular companies without needing hundreds of dollars.
• Blue-Chip Stocks: Large, stable companies with a history of steady performance can be good learning tools.
• Avoid High-Risk Investments: Options, futures, or penny stocks can be confusing and risky at the start.

For example, a teen could invest $100 in an ETF that tracks the S&P 500, giving exposure to 500 large companies. This reduces risk compared to buying shares of a single company.

Regularly review investments with your teen, asking: “Why did you choose this fund or stock?” and “How do you think it fits your goals?” This keeps learning active and intentional.

How can parents track progress and know if the account benefits their teen?

Set clear goals to measure progress, focusing on learning and engagement rather than just returns. Examples include:

• Logging into the account at least once a week to review investments
• Explaining why a particular stock or fund was chosen
• Tracking portfolio value monthly and discussing lessons from gains or losses
• Making informed decisions about buying, holding, or selling investments

Ask your teen to keep a simple journal or spreadsheet logging trades and thoughts. For example, they can write: “Bought 2 shares of XYZ because I believe in their new product. Waiting to see how sales grow.”

If your teen talks confidently about their investments and can explain basic concepts, it shows the account is a good learning tool. If they rarely log in or don’t understand their portfolio, adjust your teaching approach or try a different platform.

What tax rules affect teen brokerage accounts?

Investment income from a custodial account belongs to the minor but is reported on tax returns. Parents should be aware that:

• Teens must file a tax return if investment income exceeds the IRS threshold for the year.
• Dividends, interest, and capital gains are taxable income.
• Parents should keep detailed records of all transactions and income for tax reporting.

Parents can say: “We’ll keep track of your account’s earnings and handle taxes together so you learn how it works.” Use IRS resources or tax software to file returns correctly.

Understanding taxes early helps teens develop responsible habits, preparing them for future investing on their own.

Can teens open brokerage accounts independently?

Minors cannot open brokerage accounts on their own due to legal restrictions. Custodial accounts must be opened by adults until the teen reaches the age of majority, usually 18 or 21 depending on the state.

Once your teen reaches that age, they can open a standard brokerage account without a custodian. To prepare for this transition:

• Review their investment knowledge and goals together.
• Help them choose a brokerage with beginner-friendly features.
• Discuss responsibility and security practices for managing their own account.

For students living away from home, this is a good time to encourage financial independence with parental guidance.

How can parents ensure the teen’s investing experience is safe and positive?

Setting clear rules and safety measures helps keep investing productive:

• Agree on monthly or quarterly limits for deposits and trades.
• Avoid high-risk investments without a solid understanding.
• Use brokerages with fraud protection and parental oversight features.
• Teach your teen to use strong passwords and recognize phishing attempts.
• Schedule regular check-ins to review account activity and answer questions.

For example, you might say: “Let’s review your trades every month to see what you’ve learned and make sure everything looks right.” This builds trust and makes investing a team effort.

Frequently asked questions

Can teens invest using apps without parental permission?

Most apps require users to be 18 or older. Teens under 18 must have a custodial account opened by a parent or guardian, who oversees the account until legal adulthood.

What if my teen loses money investing?

Losses are part of investing and valuable learning experiences. Encourage your teen to see losses as lessons, analyze what happened, and adjust their strategies rather than give up.

Are there brokerage accounts specifically for students?

Some brokerages offer student promotions or accounts with no fees and educational resources. These usually still require a custodial account if the student is under 18.

How do custodial accounts affect college financial aid?

Custodial accounts count as the student’s assets on financial aid forms, which might slightly reduce aid eligibility. Parents should consider this when planning savings strategies.

Can teens withdraw money from custodial brokerage accounts?

Only the custodian (parent/guardian) can authorize withdrawals until the teen reaches legal age. This safeguards the funds while teaching investing skills.