You generally have to be 18 years old to open a brokerage account in your own name. That’s the age of majority in most states, and brokerage firms require it because an account agreement is a contract. A few states push the threshold higher: Alabama and Nebraska set the age of majority at 19, and Mississippi sets it at 21. If you’re below the threshold where you live, you can still invest, but it has to be through a custodial account that an adult opens and manages on your behalf.
Why 18 Is the Usual Minimum
A brokerage agreement is a legal contract, and contracts signed by minors are generally voidable. The minor can walk away from the deal while the other side stays bound. Brokerage firms won’t take on that risk, so they require customers opening individual accounts to have reached the age of majority in their state.
In most states that’s 18. In Alabama and Nebraska it’s 19. In Mississippi it’s 21. Once you clear the threshold, you can open a standard individual account that gives you full control over your investments and full responsibility for any losses, margin debt, or taxes that come with trading.
If You’re Younger Than the Age of Majority
Minors have two main ways into the market, and both require an adult to open and run the account.
UGMA and UTMA Custodial Accounts
Most states have adopted one of two laws that let an adult hold investments for a minor: the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA). The child is the legal owner of the assets. An adult custodian makes all the investment decisions until the child reaches the account’s termination age.
A UGMA account can hold cash, stocks, bonds, and mutual funds. A UTMA account can hold those plus a broader range of property, including real estate and other non-financial assets. Contributions to either are irrevocable gifts. Once money or property goes in, the custodian cannot take it back for personal use and has a legal duty to manage the account solely for the child’s benefit. Mismanaging the funds can create personal liability for the custodian.
Custodial Roth IRA
If the minor has earned income from a job, babysitting, lawn care, or any other work, a parent or guardian can open a custodial Roth IRA on their behalf. Contributions are limited to the lesser of the child’s earned income for the year or the annual contribution cap, which is $7,500 for 2026.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 Anyone can put money in on the child’s behalf, including a parent matching what the child earned, but all contributions count toward that single annual cap.
Contributions go in after tax, and qualified withdrawals in retirement come out tax-free. The main appeal is decades of tax-free growth starting early. The child takes over the account at the age of majority.
What Happens When the Minor Reaches the Termination Age
The termination age is when a custodial account has to be handed over to the beneficiary, now an adult, to manage on their own. It varies by state and account type. UGMA accounts typically transfer at 18 or 21. UTMA accounts most often default to 21, and several states let the custodian pick a later age, sometimes up to 25.
Brokerage firms generally freeze a custodial account at the termination date until the beneficiary converts it into a standard individual account in their own name. If the paperwork isn’t done promptly, trades and withdrawals may be unavailable in the meantime. Contact the brokerage before the termination date so the handoff is clean.
What to Know Before Opening a Custodial Account
A custodial account is the simplest path for a minor to invest, but a few features set it apart from a regular brokerage account.
Trading is restricted. Most firms don’t allow margin trading in custodial accounts, which means no borrowing from the broker to buy securities. Options trading is usually limited to basic strategies like covered calls and cash-secured puts; uncovered options are generally off-limits. Day trading is effectively unavailable too, because pattern day traders must keep at least $25,000 in equity in a margin account and custodial accounts don’t support margin. These limits exist because the custodian owes the child a fiduciary duty to manage the account conservatively. Once the account converts at the termination age, the restrictions drop away.
The child owes the taxes. Dividends, interest, and capital gains inside a custodial account belong to the child for tax purposes. A set of rules known as the kiddie tax taxes investment income above a threshold at the parent’s marginal rate rather than the child’s.2Office of the Law Revision Counsel. 26 U.S. Code 1 – Tax Imposed The rule applies to children under 18, and in some cases to older students whose earned income doesn’t cover more than half of their own support. In certain cases parents can report the child’s investment income on their own return instead of filing a separate return for the child.3Internal Revenue Service. Topic No. 553, Tax on a Child’s Investment and Other Unearned Income (Kiddie Tax)
It can shrink financial aid. On the FAFSA, a custodial account counts as the student’s asset because the child is the legal owner. Student assets are assessed at 20% of their value in the Student Aid Index, which directly reduces aid eligibility.4Federal Student Aid. Student Aid Index (SAI) and Pell Grant Eligibility Parent-owned assets face a much lower effective rate. Because custodial contributions are irrevocable, you can’t move the money out later to improve the aid picture.
A 529 plan is the main alternative. For families saving specifically for college, a 529 is worth comparing. Withdrawals used for qualified education expenses come out federally tax-free, but non-education withdrawals trigger income tax on the earnings plus a 10% penalty.5Internal Revenue Service. Topic No. 313, Qualified Tuition Programs (QTPs) A custodial account offers no such tax break, but the child can spend the money on anything once it transfers to them.
What You Need to Open a Custodial Account
Opening a custodial account requires information for both the child and the adult custodian. You’ll need a Social Security number or Individual Taxpayer Identification Number for each person, since the IRS requires them for tax reporting on investment income.6Internal Revenue Service. Taxpayer Identification Numbers (TIN) The custodian also provides a government-issued photo ID (driver’s license or passport), a current residential address, and employment information.
Brokerage firms will ask for the name and contact information of a trusted contact person at least 18 years old. The firm can reach out to that person if it suspects something is wrong with the account, such as potential financial exploitation. The trusted contact has no authority over the account itself.7FINRA. FINRA Rule 4512 – Customer Account Information
Most firms let you complete the application online. After you submit it, the firm verifies identities through third-party databases, which usually takes one to three business days. Once approved, you fund the account by linking a bank account and initiating an electronic transfer. Many major brokerages require no minimum deposit to open an account.8Vanguard. Brokerage Accounts Once the transfer clears, the custodian can start placing trades on the child’s behalf.