Author Topic: Brokerage Account for a 13 year old  (Read 1474 times)

LiseE

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Brokerage Account for a 13 year old
« on: December 04, 2018, 12:30:18 PM »
Hi all ..  I would like to open an account (a custodial account?) for my 13 year old and deposit some initial funds.  This is an idea for a Christmas present.  He's interested in investing and I thought it would be a good gift!  Has anybody done this?  Any advice to offer?  He won't have much $$ to start with ... I was thinking Drip investing might be a good way to go but not sure if it's available in all brokerage houses?

I'd also like to get him a book on how to value stocks.  Any thoughts there?

- Lisa

Blueberries

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Re: Brokerage Account for a 13 year old
« Reply #1 on: December 04, 2018, 01:31:41 PM »
Are you open to indexing to start?  I'm a proponent of stock picking, but it takes time and immense effort.  I think your son would benefit greatly from indexing and working on learning stock picking via paper trading. 

If you aren't putting much in and adding in smaller increments, look into Fidelity, specifically FZROX.  Fidelity will allow partial shares and there are no fees or minimums for that fund and some others.  The downside of Fidelity's FZROX is the lack of history (compared to VTSMX with Vanguard, but it requires a $3,000 minimum).  Full disclosure: My children invest in FZROX as part of their allowance/financial "education".  The lack of historical data on FZROX is a large downside to me, but I'm going to give it some time to prove itself.
« Last Edit: December 04, 2018, 01:54:39 PM by Blueberries »

HeadedWest2029

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Re: Brokerage Account for a 13 year old
« Reply #2 on: December 04, 2018, 04:05:03 PM »
I personally wouldn't want to start them down the path of stock picking, but there is some value in understanding how to evaluate companies I guess.  I'd opt for a paper trading format as suggested.

If I did have them trading real stocks with real money then Robinhood at least has commission free trading if dealing with a small amount to begin with.  Could be video game style trading though for a 13 y/o.

tralfamadorian

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Re: Brokerage Account for a 13 year old
« Reply #3 on: December 04, 2018, 04:28:03 PM »
+2 to indexing. If indexing is the MMM benchmark we all use, why start with suboptimal stock picking? Fidelity zero funds are great- zero maintenance fees, zero trading fees, zero expense ratios. If he does any type of part time work- babysitting, lawn mowing, etc- then he can contribute up to $5.5k to a roth.

degrom7

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Re: Brokerage Account for a 13 year old
« Reply #4 on: December 04, 2018, 04:53:29 PM »
+2 to indexing. If indexing is the MMM benchmark we all use, why start with suboptimal stock picking? Fidelity zero funds are great- zero maintenance fees, zero trading fees, zero expense ratios. If he does any type of part time work- babysitting, lawn mowing, etc- then he can contribute up to $5.5k to a roth.
Which index fund in particular? Is there a minimum amount to invest?


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tralfamadorian

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Re: Brokerage Account for a 13 year old
« Reply #5 on: December 04, 2018, 06:36:22 PM »
Which index fund in particular?

Depends on what your goal is. I personally am 50% domestic, 50% international. AKA VTSAX and VFWIX. Or FZROX and FZILX if the account is with Fidelity. Many people include bonds (BND).


Is there a minimum amount to invest?

Depends on the brokerage house. Fidelity have no minimum. Vanguard, I think, recently lowered their minimum to $3k. 

feelingroovy

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Re: Brokerage Account for a 13 year old
« Reply #6 on: December 04, 2018, 08:50:58 PM »
Schwab has lower minimums than Fidelity or Vanguard and still has low fees.

I think it's $500.

I set up a similar account for my son a few years ago. He got excited about investing after reading Rich Dad Poor Dad for Teens when he was 13.

secondcor521

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Re: Brokerage Account for a 13 year old
« Reply #7 on: December 05, 2018, 09:51:47 AM »
Schwab has lower minimums than Fidelity or Vanguard and still has low fees.

I think it's $500.

I set up a similar account for my son a few years ago. He got excited about investing after reading Rich Dad Poor Dad for Teens when he was 13.

When my kids started with Schwab a few years ago there was no minimum to open an account.  You could put $1 in and have an account.  If purchasing stocks, you'd need to have enough for at least 1 share plus the commission.  My kids are in mutual funds except one kid who owns some shares of NKE.

nereo

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Re: Brokerage Account for a 13 year old
« Reply #8 on: December 05, 2018, 10:02:36 AM »
Hi all ..  I would like to open an account (a custodial account?) for my 13 year old and deposit some initial funds.  This is an idea for a Christmas present.  He's interested in investing and I thought it would be a good gift!  Has anybody done this?  Any advice to offer?  He won't have much $$ to start with ... I was thinking Drip investing might be a good way to go but not sure if it's available in all brokerage houses?

I'd also like to get him a book on how to value stocks.  Any thoughts there?

- Lisa

My parents did this for me many years ago, and it was one of the best things they ever did for my financial education.  It was a custodial account that they opened for me when I got my first job (a paper-route) around age 11. A few times a year they would 'review' the progress and as I grew up they used it to help explain the power of compounding, the importance of saving 1/3 or more of every paycheck, and the implications on taxes. I even learned early what it was like to 'lose' money on paper, and why staying the course was the best thing I could do.

Many brokerages offer lower minimum balances for custodial accounts, particularly if it's an IRA (which requires your 13 year old to have had some sort of earned income).  If an IRA is not an option yet you can 'loan' him the minimum amount at ~0% interest, or gift it to him, or go with ETFs which generally have extremely low minimums (>$100) to begin with.


GGNoob

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Re: Brokerage Account for a 13 year old
« Reply #9 on: December 05, 2018, 11:34:11 AM »
I just opened a custodial account at Stockpile.com for each of my step-daughters (12 and 15). The reason I chose Stockpile is because they can create a read only account to log in with and monitor their stocks and can even request trades themselves for me to approve. It also allows their family to give them gift cards and they can even create wish lists of stocks. My goal is to get them excited about investing, so I'll start with them owning companies they know and work my way to index funds. I opened them up with a free $5 of stock promo and plan to give them more money for their account for Christmas.

I also want to open a Roth IRA for each of them this year as they have a little earned money from baby sitting. I'll open this at Fidelity and use their zero cost/minimum index funds.

robartsd

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Re: Brokerage Account for a 13 year old
« Reply #10 on: December 06, 2018, 12:38:53 PM »
+2 to indexing. If indexing is the MMM benchmark we all use, why start with suboptimal stock picking? Fidelity zero funds are great- zero maintenance fees, zero trading fees, zero expense ratios. If he does any type of part time work- babysitting, lawn mowing, etc- then he can contribute up to $5.5k to a roth.
IRA contributions are limited by earned income. To invest $5.5k he would have to earn $5.5k. 2019 limit for IRA contribution is $6k.

leighb

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Re: Brokerage Account for a 13 year old
« Reply #11 on: December 07, 2018, 02:08:25 PM »
Check out the "stock market game." Lots of educational resources. Also, if you signup they allow the student to invest a fictitious $100,000 for a few months. In my state it's free to sign up, but I think it varies.

degrom7

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Brokerage Account for a 13 year old
« Reply #12 on: December 07, 2018, 02:50:00 PM »
Schwab has lower minimums than Fidelity or Vanguard and still has low fees.

I think it's $500.

I set up a similar account for my son a few years ago. He got excited about investing after reading Rich Dad Poor Dad for Teens when he was 13.

I'm wondering if I can do this. My baby is due to be born next summer. I won't put a lot in. Probably only a hundred dollars or more each year, but I'm hoping the power of compounding will increase it dramatically especially if I start it when the baby is born.


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nereo

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Re: Brokerage Account for a 13 year old
« Reply #13 on: December 07, 2018, 03:02:37 PM »

I'm wondering if I can do this. My baby is due to be born next summer. I won't put a lot in. Probably only a hundred dollars or more each year, but I'm hoping the power of compounding will increase it dramatically especially if I start it when the baby is born.


For very young children, why not contribute to a 529 educational savings program?  Then at least its tax-free for qualified expenses when your kids gets older... you can set one up even before your baby is born.

degrom7

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Re: Brokerage Account for a 13 year old
« Reply #14 on: December 07, 2018, 03:12:46 PM »

I'm wondering if I can do this. My baby is due to be born next summer. I won't put a lot in. Probably only a hundred dollars or more each year, but I'm hoping the power of compounding will increase it dramatically especially if I start it when the baby is born.


For very young children, why not contribute to a 529 educational savings program?  Then at least its tax-free for qualified expenses when your kids gets older... you can set one up even before your baby is born.

Thanks. Can I set one up at Vanguard?


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nereo

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Re: Brokerage Account for a 13 year old
« Reply #15 on: December 07, 2018, 05:28:21 PM »

I'm wondering if I can do this. My baby is due to be born next summer. I won't put a lot in. Probably only a hundred dollars or more each year, but I'm hoping the power of compounding will increase it dramatically especially if I start it when the baby is born.


For very young children, why not contribute to a 529 educational savings program?  Then at least its tax-free for qualified expenses when your kids gets older... you can set one up even before your baby is born.

Thanks. Can I set one up at Vanguard?

Each state sets up its own rules for a 529, and you can choose whichever state's program you like, even if you've never lived there.  Some are much better than others.  I do not know whether Vanguard is the brokerage for any of the 529s.  Mine is thru Blackwater and is invested in a low-cost index fund. 
Google '529 state plans' and you will get a ton of information.  It acts like a Roth (post-tax with tax-free growth and no taxes at disbursement of qualified expenses).

feelingroovy

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Re: Brokerage Account for a 13 year old
« Reply #16 on: December 09, 2018, 07:21:00 PM »
Schwab has lower minimums than Fidelity or Vanguard and still has low fees.

I think it's $500.

I set up a similar account for my son a few years ago. He got excited about investing after reading Rich Dad Poor Dad for Teens when he was 13.

I'm wondering if I can do this. My baby is due to be born next summer. I won't put a lot in. Probably only a hundred dollars or more each year, but I'm hoping the power of compounding will increase it dramatically especially if I start it when the baby is born.


I think all you will need is the baby's social security number. Once you have that, you can definitely set up an account.

nereo

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Re: Brokerage Account for a 13 year old
« Reply #17 on: December 10, 2018, 05:11:20 AM »
Schwab has lower minimums than Fidelity or Vanguard and still has low fees.

I think it's $500.

I set up a similar account for my son a few years ago. He got excited about investing after reading Rich Dad Poor Dad for Teens when he was 13.

I'm wondering if I can do this. My baby is due to be born next summer. I won't put a lot in. Probably only a hundred dollars or more each year, but I'm hoping the power of compounding will increase it dramatically especially if I start it when the baby is born.


I think all you will need is the baby's social security number. Once you have that, you can definitely set up an account.

True, all you really need is the baby's SS# and name and birth day.  BUT, if you wanted to start one before the baby was born, you can set it up in your own name (ior your partners), and then transfer the account to your baby's name once s/he is born.  Using that strategy you can begin saving for your unborn child's future education even years before s/he is born.