December 27, 2011 | In: General

What Is the Minimum Age to Trade Stocks?

I am seeing many questions over the Internet asking about the minimum age to trade stocks. Some are asking if it’s 16, 18, 20, or even 25 years!

I will first answer the question, and then discuss it. The minimum age to trade stocks is 18 years old, in the United States and Canadian markets (other countries may have different regulations when it comes to age eligibility for trading stocks). I was personally about 30 years old when I started trading stocks.

Now, if the minimum age to trade stocks is 18, does it mean that it’s impossible to trade stocks if you’re below that age? Well, the good news (for those who are below that age) is that it’s possible, and the way to do it is by making one of your parents (or one of your guardians) open the investor’s account for you with the bank (it’s called a custodial account). This way, you will have full access to the account and you can trade in the stock markets, however, the one who opens the account will be responsible for that account (when it comes to issues arising with the account, as well as paying taxes on the account). Margin accounts (that allow you to short stocks – here’s an introduction to shorting stocks if you’re interested in the subject) are even trickier because they will allow you to play with money that isn’t yours (which is not a favorite by the bank especially when you’re below 18, regardless of who’s responsible for the account).

But why are there age limitations for trading stocks?

To answer this question, let me clarify a myth. Even if you are 10 years old, and you’re making enough money, you have to pay taxes! I’m saying this because some believe that the age limitation exists because those under the age of 18 do not have to pay taxes (which is wrong), and stock trading may generate a substantial amount of money. However, what is right is that it is more expedient for your parents to do the taxes for you, especially when you’re generating a lot of money, and that’s one of the reasons why there is this age limitation.

Another reason is that while stock trading is not a sin, it can quickly become an obsession (or addiction) with someone who’s very young and may need to be monitored by his parents. A person who’s less than 18 years old may drop school just to trade stocks. And while making money is probably the point for many in this life, having at least a high school education is the standard these days (governments do not want their people to become money grabbing idiots at a very young age).

So what do I think? Well, if you really care about my point of view, I think that the current system works, and that a person who’s under 18 and who wishes to trade stocks will get the best of both worlds (if, and only if, one of his parents, or a guardian, opens up the investor’s account for him), which is a good thing (trading without responsibility).

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