Teens Can Trade Stocks With Real Money. But Should They?
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Here's your money briefing for Wednesday, May 19th. I'm J.R. Whelan for The Wall Street Journal. We've talked a lot over the past year about the flood of young people in their 20s and 30s getting into investing through new trading apps. But now Wall Street's preparing an even younger generation of investors, kids as young as 13.
And a lot of this really is made possible by technology, which has really pushed down the cost of nearly all financial services. And it's really made the industry focus a lot more on volume. And that means pursuing all potential customers and not just the really wealthy ones.
Coming up, our investments reporter Justin Baer will tell us about the new trading products targeting teens, the concerns they're raising, and the safeguards they're putting in place. That's after the break.
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For ages, lots of middle and high schoolers have learned about stocks by trading fake money for fake shares. But a number of companies, most recently Fidelity, are offering new products that let kids ages 13 to 17 buy actual stocks using real money in hopes of making real profits. Our investments reporter, Justin Baer, is here to talk about it. Justin, thanks for being with us.
Great to be here.
So, Justin, what do these products allow kids to do and how do they actually work?
Sure. So let's just start with a few things that function just like the grown-ups' accounts. One, there are no commissions on online stock trades, no minimum balances, no account fees. The teens can buy and sell fractional shares of stocks. So think about being able to buy a dollar's worth of a share in Tesla, which has been trading this week at more than $580. And also the cash that they accumulate can be used and spent on a debit card. There are some guardrails in place, though. The teenagers can't use options to trade with them, and they can't buy securities on margin. You also can't deposit more than $30,000 into your account in any given year.
Okay, but fractional shares and handling up to $30,000? That sounds pretty grown up and kind of risky for young people to be doing.
Sure. I mean, essentially what it does is it lowers the barriers of entry to trading the markets for many folks. So I think a lot of popular stocks may trade in the triple digits, maybe even in the thousands. And so that's out of reach for some investors. So it allows them to do that. It does come with risk, though, like anything else. And so, you know, you can still lose the same amount, same percentage, of course, when your account is $300 in it than if you had $3 million.
Now, regarding Fidelity's new investment product for teenagers, what are the rules around opening an account?
You have to have your parents involved. Your parents or guardians need to have already had established a Fidelity account, and they essentially sign off with Fidelity on the creation of the teen account. Once that happens, the control of it is largely handed over to the child.
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