The share of American adults who own stock has been dropping in recent decades, even as financial markets have ascended to historic highs. One potential way to bring more people into the world of investing: Start them young.
Some financial educators say easing teens into the real world of investing — with some guardrails to help prevent them from losing more money than they can afford — could increase the number of people who are buying and selling stocks throughout their lifetimes.
“The truth is that most people don’t really know how to invest,” said Jennifer Bethel, faculty director of the Babson Financial Literacy Project. “If you talk to the average person on the street . . . the vast majority don’t even know how to open an account, much less decide what goes into the account.” She said real-life investing experience early on can give them the confidence they’ll need later.
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 company said the Fidelity Youth Account is intended to allow younger teens a taste of the financial world — and its very real stakes — in a way that gives the adults in their lives some insight into how they’re spending money.
Fidelity says it hopes that the teens will become long-term brokerage customers. The program debuted as the financial services giant and other companies compete for a growing market among solo investors who carry out free trades online. Digital brokerages, most notably Robinhood, have drawn millions of traders attracted by the ease of investing through mobile phones.
While retail investing has increased in recent years, overall stock ownership in the United States has remained lower than it was before the Great Recession. A Gallup survey released in June 2020 found that 55 percent of adults reported they owned stock, down from an average of 62 percent of respondents who said they owned stock from 2001 to 2008.
That number gets smaller when people who own equities through mutual funds and retirement accounts are factored out. A Pew Research Center survey in 2016 found that 14 percent of families were directly invested in individual stocks.
The Fidelity Youth Account product lets teens under age 18 buy and sell stocks and funds, or use their account as a regular bank account with a debit card.
Parents are notified of trades, but they do not have to approve them — though they would have to sign off on any money being transferred from their main accounts. Teens can deposit their own money — from a summer or after school job, for instance — and invest it freely.
The program offers fractional stocks, which people can buy if they don’t have enough for a whole share, but it doesn’t allow teens to buy on margin or trade options — which are riskier transactions. Cryptocurrency trading is not available.
Jennifer Samalis, senior vice president of customer acquisition and loyalty at Fidelity, said the goal is to balance safety with the autonomy she believes is required to teach real lessons about finance.
“We know that mistakes can be made, but those are teaching moments,” Samalis said. She noted that about a third of teens in a pilot for the program traded equities, while 40 percent used more conventional banking services, such as a debit card.
But while teens can learn from investing at an early age, it may not be the most important lesson they need to learn about finance, according to some experts.
Michelle Singletary, a syndicated personal finance columnist for The Washington Post, said she encourages parents to teach simple lessons about “delaying gratification” and saving for their future needs and wants. For instance: saving money from a summer job for 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 kid to invest in Apple right now, they’re not going to have the wealth that they need by the time they retire,” Singletary said. “That’s just not true.”
Other personal finance experts argue that although teens may not be likely to secure their long-term finances through online trading before they graduate from high school, the experience itself will have value — especially now that fewer people can count on defined-benefit retirement plans and will instead have to make their own decisions about what to put in accounts such as 401(k)s.
Neale Godfrey, chairman of the Children’s Financial Network, which teaches children and parents about money, said teens should have access to education, training, and parental guidance to go along with trading. But she said there is no substitute for real-world experience.
“I love the idea that we can get teenagers involved, because it’s real, and when it’s real then you’re going to have an impact,” Godfrey said. “If you just . . . let them do a fake portfolio, then it’s not the same thing.”