Like many investors, Ian Martin started out by buying stock in his favorite companies: Nike Inc., Starbucks Corp. and Tesla Inc.
Unlike most, he was 14 at the time.
His parents set up a custodial brokerage account to teach him about investing, which he seeded with $800 in Christmas and birthday money. They hadn’t paid much attention to budgeting and investing their own money until their 30s and wanted Ian to learn from their mistakes.
“We just really wanted Ian to have a solid foundation, get started early and leverage that amazing thing called time,” said father Aaron, 48.
Ian took to it, searching for companies with potential, telling his parents which stocks he wanted to buy and checking the results “probably a little too often,” Aaron said. The 19-year-old now majors in finance at the University of North Carolina, Greensboro.
“I’m very comfortable putting hours of research into those companies, and I absolutely love doing it,” Ian said. “I have the risk tolerance for it, and thankfully, I get the returns.”
Many parents have made the same choice. They’re opening accounts that let teens learn the basics of investing—with their supervision. And financial firms have noticed, rolling out products designed to appeal to parents while locking in a new, younger generation of customers.
The Charles Schwab Corp., for example, this year launched a joint brokerage account for teens that turns into a retirement account once the holder becomes an adult. Acorns Grow Inc., the financial wellness and micro-investing firm, started Acorns Early Invest, a parental-managed account that invests in exchange-traded funds. The Acorns app also lets parents assign chores and automatically put allowance money into investments.
Like Aaron, many of the parents want their offspring to start investing early precisely because they didn’t. Having missed years of potential gains, they’re determined not to let that happen with their kids.
Others, however, are driven by concern about the future economy, which could be radically transformed by artificial intelligence. They see teaching investment skills early as a way to ensure their kids can earn an income even if the job market looks nothing like it does today. Nor can their children rely on Social Security, with the program’s trust fund projected to run dry in 2032.
“They’re inheriting an economy that’s a lot tougher than when I joined the Air Force in ’97,” said Janelle Just Quinn, 47, a veteran and founder of 3FIVE Wealth in Dallas. She opened Schwab accounts for her two teenage daughters this year. “I am making sure they know what their options are,” Quinn said.
A Schwab survey this year found that 73% of responding parents considered it very important for teens to learn about investing. The same survey found 59% of teens became aware of investing before they turned 13, compared with just 6% of their parents.
Accounts geared toward teens typically include strong parental controls. With Acorns Early, parents manage the account and can choose whether to give their kid a debit card tied to it, while the underlying assets are owned by the child. They can also assign their children “money missions”—gamified lessons that teach financial literacy and offer rewards for completion.
Startup Greenlight Financial Technology Inc. also offers investing accounts owned by parents, with the children proposing trades that require parental approval. Customers aged 15 to 18 have invested $9.2 million on the platform so far this year, according to the company.
With Schwab’s new joint accounts, both parents and teens have the ability to place trades and withdraw money. The parents, however, get notified through the app whenever their child tries to make a trade or withdrawal, giving them a chance to stop the transaction. Schwab also offers educational modules for young investors, and teens appear to be using them, said Heather Fischer, the company’s managing director of retail client experience.
“So they’re making these decisions in a responsible, educated way, which is really what we wanted,” she said.
Naseema McElroy set up an Acorns Early account for her daughter, Naima, as part of teaching her the fundamentals of money management. The registered nurse wants her 12-year-old daughter to understand investing while she’s growing up, so she won’t be intimidated by it as an adult.
“People make investing like this big thing, and it should be something that just runs in the background of your life and something that’s automatic,” said Naseema, 45, of San Francisco.
Starting early as an investor has obvious benefits, but there are potential pitfalls as well. Erika Rasure, with the Beyond Finance debt consolidation and financial services firm, said there’s a risk teens will confuse investing with gambling, particularly if they’re being egged on by social media. They can also end up tying their identity to their net worth or the performance of their portfolio—unhealthy for adults and minors alike.
“It really needs to be put in the perspective of a kid being able to say, ‘My portfolio is growing because I am making thoughtful decisions,’” said Rasure, the company’s chief financial wellness advisor. “There’s a big difference between that and, ‘I matter because my portfolio is growing.’”
Connor Du, 17, tries to ignore the noise of social media, with its emphasis on fast rewards. A high school senior in San Diego, he began investing because he was curious about how economies and businesses work. He asked his parents to open a joint account for him with Interactive Brokers, where he makes all his stock purchases with his parents’ approval.
Every investment he makes he writes down in a log book, noting the stock’s purchase price and what convinced him to buy it. Later, he adds how well the stock performed and whether he made any mistakes.
“The good thing about it at my age is that the stakes are still somewhat small—they’re still manageable,” Du said. “Time is really an important thing for me, because you can never control the market, but you can control where you begin.”
This article was provided by Bloomberg News.