Charles Schwab offers teens the opportunity to gain real-world investing experience.
With a Schwab Teen Investor account, teens ages 13 to 17 can open a joint brokerage account with a parent and start investing.
The Schwab account is not the first investment account for teenagers; The Fidelity Youth account, launched in 2021, also allows teens to start investing while their parents monitor account activity. The Schwab account is a joint account with the parents, who will have full access to help manage it.
A recent Schwab survey showed that 70% of teens are “very” or “extremely” interested in investing. This echoes Fidelity’s 2023 Teens and Money Study, which found that 75% of teens said investing was important to them, even if only 23% had already started investing.
“We want to help young investors develop good habits and prepare them for a life of informed decisions and meaningful results,” Jonathan Craig, head of investor services at Charles Schwab, said in a post announcing the account’s launch.
Here are seven things teens and their parents should know about using the Teen Investor Account before they get started:
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Education is an important part of the Schwab Teen Investor Account from the beginning. Once a teen signs up for the account, they will be rewarded for taking Schwab’s Quick Start to Stock Investing course within the first 45 days.
After completing the course, teens will receive $50 invested in the top five stocks in the S&P 500. Schwab will invest $10 in fractional shares of each of the top five stocks at that time.
The account bonus offers a monetary incentive to help teens learn the basics of investing, but there are additional educational opportunities as they use the account.
Teens will have access to an educational series focused on four topics after opening the account: personal finance basics, basic investing, how to invest in stocks, and how to trade Schwab. From there, they can continue learning by accessing Schwab’s education center, which includes videos and articles for investing beginners.
“It is an incredibly exciting time to be a new investor as there has never been greater access to markets, information, product options and tools,” Craig said. “But with greater access also comes greater complexity and the need to provide resources and education to help investors of all ages think through it all and make investment decisions based on their goals.”
Since the Teen Investor Account is a joint brokerage account for teens and parents, parents are encouraged to participate in their children’s investment journeys. And according to a recent Schwab survey, that’s what both teens and their parents are looking for.
Not only do 91% of parents want to help their children invest, and 73% believe it is “very important” for teens to learn how to invest, but 87% of teens also want their parents involved in helping them invest. They even say they trust their parents more than other sources of guidance.
Parents get involved from the beginning by starting the account application process. Once the account is opened, teens can manage their money and investments themselves, but parents have full visibility into account activity at all times. Both parents and teens can add or withdraw funds from the account.
Parents can also choose to open a debit card when they sign up, which is connected to the teen’s account. Teens can use the card to access cash in the account. While there is no minimum to open the account, Schwab will not issue the debit card until a $100 funding requirement is met.
Parents can set up spending alerts and must be the one to open or close the debit card account.
There are many investment options for teens to choose from once their account is set up and funded. There is no minimum balance requirement to start investing and no minimum trading requirements. There are also no account maintenance fees.
Available investments include exchange-traded funds (ETFs), mutual funds, fixed income products (such as bonds and U.S. Treasury bills), and fractional shares. Teens can also choose from Schwab Investing Themes, which offer select investments in specific sectors, such as cybersecurity or artificial intelligence.
Some investment types are restricted within the account. These include margin trading, options trading, non-cleared fund trading, FOREX, alternative investments and more. Teens will not have access to individual cryptocurrencies through the account, although they can invest in exchange-traded products (ETPs) that are linked to cryptocurrency prices.
While the account limits some of these riskier investment options, it’s still important for teens (and parents) to understand the risks of investing. Investments are not FDIC insured like bank accounts are, for example. You can lose money on your investments and the markets are volatile.
Read more: How to start investing: a step-by-step guide
There is some flexibility in what parents and teens choose to do with the account in adulthood.
After turning 18, teens can continue using the account (until age 21) or transfer their assets to a regular individual brokerage account.
If teens and parents want to continue sharing access, they can choose to keep the teen’s account open longer. Another option is to open a new joint brokerage account.
Otherwise, older teens can adopt the investing principles they have learned and open their own individual brokerage accounts. If the new account is opened in your name, parents may not have ownership or access as they would with the teen account.
Schwab’s joint brokerage account, along with Fidelity’s teen-owned brokerage account, offer options for teens to invest and gain financial education with the help of their parents.
But they’re not the only way teens can start learning and practicing good financial habits. Here are a few more alternatives parents and teens can consider today:
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Custodial account: Unlike a teen investment account, a custodial account (UGMA or UTMA) is set up and managed entirely by a parent or guardian. Parents can contribute and manage the account before their child receives access, usually at age 18 or older.
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Roth IRA: Roth IRAs are popular options for tax-advantaged retirement savings, and they’re even available for children. Parents can open custodial Roth IRAs for their earning children (which can range from a regular babysitting job to a part-time summer job) and manage the account until their child reaches adulthood.
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High Yield Savings Account: A high-yield savings account doesn’t offer investment opportunities, but it can help teens save for the future. Today, the best high-yield savings accounts earn more than 4% APY. Plus, the savings are FDIC insured, so there’s no risk of losing the money.