Letting a 13-year-old trade stocks sounds scary, but experts see value in Fidelity’s new youth program

On May 18, Fidelity Investments unveiled a product that allows 13 to 17 year olds to deposit, spend and invest money through brokerage accounts linked to a parent or guardian’s account. The Boston-based company said the Fidelity Youth Account is meant to give young teens a taste of the financial world – and its very real issues – in a way that gives the adults in their lives a glimpse of how they spend money.

Fidelity says she hopes the teens will become long-term brokerage clients. The program got its start as the financial services giant and other companies vie for a growing market among individual investors who conduct free transactions online. Digital brokerage firms, notably Robinhood, have attracted millions of traders attracted by the ease of investing via mobile phones.

While retail investment has increased in recent years, overall shareholding in the United States has remained below what it was before the Great Recession. A Gallup survey published in June 2020 found that 55% of adults reported owning stocks, compared to an average of 62% of respondents who reported owning stocks from 2001 to 2008.

This number decreases when people who hold stocks through mutual funds and retirement accounts are excluded. A Pew Research Center A 2016 survey found that 14% of families were directly invested in individual stocks.

The Fidelity Youth Account product allows teens under the age of 18 to buy and sell stocks and funds, or use their account like a regular bank account with a debit card.

Parents are notified of transactions, but they do not have to approve them, although they should approve any transfer of money from their main accounts. Teens can deposit their own money – from a summer job or after school, for example – and invest it freely.

The program offers split stocks, which people can buy if they don’t have enough for an entire stock, but it doesn’t allow teens to buy on margin or trade options, which are riskier trades. . Cryptocurrency trading is not available.

Jennifer Samalis, senior vice president of customer acquisition and retention at Fidelity, said the goal was to balance the security and empowerment that she believes is needed to teach real lessons about finance.

“We know mistakes can be made, but these are teaching moments,” Samalis said. She noted that about a third of teens participating in a pilot for the program traded stocks, while 40 percent used more conventional banking services, such as a debit card.

But while teens can learn investing from a young age, it might not be the most important lesson they need to learn about finance, some experts say.

Michelle singletary, personal finance columnist for the Washington Post, said she encouraged parents to teach simple lessons about “delaying gratification” and saving for their future needs and wants. For example: saving money on a summer job to buy things they might want to buy during the school year when they can’t work as much.

“Don’t be so frantic to think that if you don’t teach your child to invest in Apple right now, they won’t have the wealth they need when they retire,” Singletary said. “It just isn’t true.”

Other personal finance experts argue that while teens are unlikely to secure their long-term finances through online business until they graduate from high school, the experience itself will be valuable. , especially now that fewer people can rely on defined benefit pension plans and instead will have to make their own decisions about what to put in accounts like 401 (k) s.

Neale Godfrey, president of the Children’s Financial Network, who teaches children and parents about money, said adolescents should have access to education, training and parenting guidance to accompany the business. But she said there is no substitute for real world experience.

“I like the idea that we can get the teens involved, because it’s real, and when it’s real, you’re going to have an impact,” Godfrey said. “If you come from. . . let them make a fake portfolio, then it’s not the same.

Andy Rosen can be contacted at [email protected] Follow him on twitter @andyrosen.

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