What is minimum age to open account on Charles Schwab, Fidelity, TD Ameritrade, Robinhood, Etrade, and Firstrade brokerage?

Despite all the different pieces of investment advice you could receive from different financial advisors and planners, the one tip that almost all of them agree on is to start saving and investing as early as you can. This is because few things surpass the power of compounding returns.

So you may be wondering how old you (or a child) have to be before you can open an account with popular brokers like Robinhood, TD Ameritrade, Etrade, and Fidelity. This article will answer that question and offer some tips to younger individuals that are looking to start investing.

Minimum Age to Open Brokerage Account

The minimum age to legally open and own a brokerage account in the U.S. is 18 years. This is true for all U.S.-based brokers, including Robinhood (charging $0 for stocks and ETFs, not offering mutual funds), Firstrade ($0, $0), TD Ameritrade ($6.95, $49.95), Etrade ($6.95, $19.95), Schwab ($4.95, $49.95) and Fidelity ($4.95, $49.95).

If you (or a child) are not yet 18 years of age and are eager to start investing some of your hard-earned cash there is another option to enter the stock market before this age – custodial accounts – which we’ll get into shortly. But first let’s highlight why it’s so important to start saving and investing at a young age.

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Why You Should Start Investing Early

Everyone will tell you it’s important to start saving and investing from a young age, even if it’s just a little bit each month, and the reason is due to the compounding effect of returns over time. Let’s take a simple example – Jill and Joey are two identical 30-year olds that invest $50 each month into the same diversified ETF returning ~7% a year. Jill started investing when she was 15 years old and her investment is now worth $15,848. Joey started investing when he was 20 years old, just five years after Jill, and his portfolio is now worth $8,654.

Because Jill was putting in $50 a month (or $600 a year) for five more years than Joe, she contributed an additional $3,000 to her portfolio. But notice that her portfolio is worth $7,194 more than Joe’s. Even after accounting for the extra $3,000 that Jill saved, Jill generated an extra $4,194 in investment gains because her money was working for her for an additional five years. This is the incredible effect that time has on our investments – if you can get time on your side your portfolio is already going to be off to a great start.

Minimum Age to Open Custodial Accounts

If you are under the age of 18 but are ready to start investing, the good news is you still can, but you will need to do so using a custodial account. Custodial accounts, which are offered by most brokers (including TD Ameritrade, Etrade, and Fidelity), are generally setup by a parent or guardian for the benefit and eventual ownership of a minor.

When the account is setup and funded, the custodian indicates the minor for whom it was setup. That child is the rightful owner of the account and all the assets within it; however they do not have control over those assets until they reach adulthood, which is the age of 18 years in most U.S. states. Prior to the age of 18, the custodian has full discretion over how the account’s assets are invested. The custodian is permitted to withdraw funds from the account during this time only to the extent that they are used for the minor’s benefit.

Once the minor becomes a legal adult, they assume full discretion over how the account’s assets are invested and/or spent. Although many parents setup custodial accounts for a child’s future education because of the tax advantages they offer, they could also be used to give a minor real investing experience. A parent could setup the account and allow the minor to contribute to and guide the investing decisions within the account prior to them reaching adulthood.

Minimum Age to Open Account Conclusion

In summary, you must be at least 18 years of age to legally open and manage a brokerage account in the U.S. However, if you are a younger individual who is interested in investing now (or you know someone who is) custodial accounts basically offer you a path to investing before reaching 18 years. We highly recommend these accounts for youth interested in the markets if for no other reason than the effects of compounding returns.

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