Charles Schwab offers young people an opportunity to gain real-world investment experience.
With the 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 young people to start investing while their parents monitor the account’s activity. Schwab’s account is a shared account with parents, who will have full access to help manage it.
A recent survey from Schwab showed that 70% of young people are “very interested” or “very interested” in investing. That’s similar to Fidelity’s 2023 Teens and Money Study, which found that 75% of teens said investing was important to them, even though only 23% had started investing.
“We want to help young investors build good habits and make smart decisions for life and meaningful results,” said Jonathan Craig, head of investor services at Charles Schwab, in a post announcing the account’s launch.
Here are seven things teens and their parents should know about using a Teen Investment Account before they get started:
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Education has been a big part of Schwab’s Youth Investment Account since the beginning. When a young person signs up for an account, they will be rewarded with taking Schwab’s Quick Start to Stock Investing course within the first 45 days.
After completing the course, the youth will receive $50 invested in each of the top five stocks in the S&P 500. Schwab will invest $10 in fractional shares of each of the top five stocks during that time.
The bonus account provides a financial incentive to help young people learn the basics of investing, but there are more educational opportunities as they use the account.
Youth will have access to an educational series focused on four topics after opening an account: Personal finance essentials, Investing 101, How to invest in stocks, and How to Trade at Schwab. From there, they can continue learning by accessing Schwab’s education hub, which features videos and articles for new investors.
“It’s an incredibly exciting time to be a new investor as there’s never been greater access to markets, information, product choices, and tools,” said Craig. “But greater access brings greater complexity and the need to provide resources and education to help investors of all ages plan for everything and make investment decisions based on their goals.”
Since the Youth Investor Account is a joint transaction account for both youth and parents, parents are encouraged to be involved in their children’s investment journey. And according to a recent Schwab study, that’s what both teens and their parents want.
Not only do 91% of parents want to help their kids invest, and 73% believe it’s “very important” for teens to learn about investing, but 87% of teens want their parents to be involved in helping them invest. They even said that they trust their parents more than any other guidance.
Parents participate from the beginning by starting the account application process. After the account is opened, teenagers can manage their money and investments themselves, but parents have full visibility into the account activity at all times. Both parents and teenagers can add or withdraw money from the account.
Parents can also choose to open a debit card when they sign up, which is linked to the teen’s account. Youngsters can use the card to access any money held in the account. Although there is no minimum to open an account, Schwab will not issue a debit card until the $100 cash requirement is met.
Parents can set spending alerts, and must be the one to open or close the debit card account.
There are many investment options for teenagers to choose from once their account is established and funded. There is no minimum balance requirement to start investing, and there are 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 US Treasury Bills and bonds), and fractional stocks. Youngsters can also choose from Schwab’s Investment Themes, which offer selective investments in specific sectors, such as cybersecurity or AI.
Some investment types are limited within the account. This includes margin trading, options trading, commodity trading, FOREX, alternative investments, and more. Newbies will not have access to cryptocurrencies through an account — although they may invest in exchange-traded products (ETPs) that track cryptocurrency prices.
Although the account limits some of these risky investment options, it is still important for young people (and parents) to understand the risks of investing. Investments are not FDIC insured the way 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 as they get older.
After turning 18, teenagers may continue to use the account (up to age 21) or transfer their assets to a regular brokerage account.
If the teen and parents want to continue sharing access, they can choose to keep the teen’s account open for a longer period of time. Another option is to open a new joint brokerage account.
Otherwise, young adults may take the investment principles they have learned and open their own retail accounts. If a new account is opened in their name, parents may not have the same ownership or access as they would with a teenage account.
Schwab’s joint brokerage account, and Fidelity’s youth-owned brokerage account, both offer options for youth to invest and receive financial education with help from parents.
But they are not the only way young people can start learning and practicing good money habits. Here are a few other options that parents and teens can consider today:
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Last account: Unlike a youth investment account, a savings account (UGMA or UTMA) is fully set up and controlled by a parent or guardian. Parents can donate and manage the account before their child gets access, usually 18 or older.
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Roth IRA: Roth IRAs are popular options for tax-advantaged retirement savings — and they’re also available for children. Parents can open Roth IRAs to keep their children’s income (which could be from a regular babysitting gig to a part-time summer job) and manage the account until their child is an adult.
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High yield savings account: A high-yield savings account does not offer investment opportunities, but it can help young people save for the future. Today, high-interest savings accounts earn more than 4% APY. Also, the savings are guaranteed by the FDIC, so there is no risk of losing money.
