Teenagers have one financial asset adults can never buy back: time. Starting to invest at 16 instead of 26 means 10 extra years of compounding — at 7% real returns, those 10 years roughly double the end result. The accounts exist, the minimums are low or zero, and the process is simpler than it has ever been. Here is how to actually start.
What changed in 2026
- Zero-minimum investing is standard. Fidelity, Schwab, and several other brokers offer custodial accounts with no minimum balance and fractional shares, so any amount can be invested immediately.
- Financial literacy requirements expanded in several states — more teens are being exposed to basic investing concepts in school, but school curricula rarely cover the actual account-opening mechanics.
- Youth-focused platforms launched (and some failed). Evaluate platforms on fees and investment options, not flashy apps. Boring and low-cost wins over long timelines.
Two accounts to know
| Account type |
Earned income required? |
Contribution limit |
Tax treatment |
Who controls |
| Custodial Roth IRA |
Yes |
$7,000 or earned income (lower) |
Tax-free growth and withdrawals |
Parent until age of majority |
| Custodial brokerage |
No |
None |
Capital gains taxed |
Parent until age of majority |
| UTMA/UGMA account |
No |
None |
Kiddie tax rules apply |
Child's asset legally |
Start with a custodial Roth IRA if you have earned income. The tax-free growth over 50+ years is unbeatable. Open a custodial brokerage account too if you want to save beyond the Roth limit or without earned income.
Step-by-step: opening the accounts
Custodial Roth IRA:
- Get a part-time job or legitimate paid work — lawn mowing, tutoring, babysitting all count.
- Document income. Keep a simple record of hours and pay.
- Ask a parent to open a custodial Roth IRA at Fidelity or Schwab (search for "youth Roth IRA" or "custodial Roth IRA").
- Contribute up to your earned income for the year.
- Select a total market or S&P 500 index fund immediately.
Custodial brokerage:
- Parent opens a custodial (UTMA/UGMA) account at Fidelity, Schwab, or similar.
- Fund with any amount — $25, $100, whatever is available.
- Buy fractional shares of a total market index fund.
- Set up automatic monthly contributions if possible.
What to invest in
For a teenager's first investment account, the answer is straightforward:
| Investment |
Why |
Example tickers |
| Total US market index fund |
Diversification, ~0% cost, no decisions |
FZROX (Fidelity), SWTSX (Schwab) |
| S&P 500 index fund |
500 largest US companies, very low cost |
FXAIX, SWPPX |
| Total world index fund |
Global diversification including international |
FZILX + FZROX combo |
Pick one of these. Buy more every month. Do not switch. This is the entire strategy for the first few years.
How much to invest
There is no minimum that "matters" — what matters is the habit of investing consistently.
| Monthly amount |
Starting age 16 |
Value at 65 (~7% real return) |
| $25/month |
16 |
~$130,000 |
| $50/month |
16 |
~$260,000 |
| $100/month |
16 |
~$520,000 |
| $50/month |
26 |
~$130,000 |
The same $50/month started at 16 produces what $200/month started at 26 would produce. Start now, with whatever you have.
Understanding the Roth IRA advantage for teens
Most teens earn little enough that they owe zero or minimal income tax. A Roth contribution is taxed at 0% going in (or near 0%), then grows tax-free for 50+ years. This is an almost unbeatable scenario: free tax-free compounding decades.
Contrast with a 45-year-old contributing to a Roth at a 22–24% marginal rate. The "cost" of buying tax-free growth is far higher.
How to pick your broker
| Broker |
Custodial Roth? |
Min balance |
Fractional shares? |
| Fidelity |
Yes (Youth IRA) |
$0 |
Yes |
| Schwab |
Yes |
$0 |
Yes |
| Vanguard |
Yes |
$0 |
Yes (most funds) |
| Robinhood |
No custodial |
18+ only |
Yes |
Use Fidelity or Schwab. They have the best combination of zero minimums, strong index fund options, and custodial infrastructure.
Common mistakes
Waiting until you have "enough." Every month you wait is a month of compounding you will not get back. $25 is enough to start.
Picking individual stocks. One bad stock pick at 16 can sour someone on investing for years. Index funds build the habit and the wealth; experiment with individual stocks only with "fun money" you can afford to lose completely.
Cashing out early for purchases. Your Roth IRA is not a savings account. Treat it as untouchable until retirement.
Ignoring the Roth IRA in favor of only a savings account. High-yield savings is appropriate for money you need within 1–3 years. For anything 5+ years away, investing beats saving.
What to skip
- Crypto as your main investment. Volatility and lack of earnings make crypto unsuitable as the core of a compounding strategy for a teenager.
- Complex financial products (options, leveraged ETFs, futures). These are not beginner investments — they're ways to lose money faster.
- Investing money you might need soon. Keep 1–2 months of spending in savings; invest only money you won't need for 5+ years.
FAQ
Can a 15-year-old open a Roth IRA?
Not independently — a custodial Roth IRA requires a parent or guardian to be the account custodian. The child needs earned income; the parent manages the account until age of majority.
What if I have no job?
You cannot contribute to a Roth IRA without earned income. A custodial brokerage account (UTMA/UGMA) funded by parents has no earned income requirement and no contribution cap.
Do I owe taxes on my investments?
For a Roth IRA, qualified withdrawals are tax-free. For a custodial brokerage, gains and dividends may be subject to the "kiddie tax" (taxed at parent's rate if above a threshold). At small amounts, the tax impact is minimal.
When does the account become mine?
At the age of majority in your state — typically 18, sometimes 21 for UTMA accounts. At that point, you become the account owner and the custodian (parent) is removed.
Where to go next
See How to open a Roth IRA for a kid in 2026, What is compound growth in 2026, and How to DCA into index funds in 2026.