7 things to know about the new Schwab business account for teenagers

Charles Schwab offers young people the opportunity to gain real-world investing experience.

With the Schwab Teen Investor Account, teens ages 13 to 17 can open a joint trading account with a parent and start investing.

A Schwab account is not the first investment account for teenagers; The Fidelity Youth Account, launched in 2021, also allows young people to start investing while their parents monitor the account’s performance. A Schwab account is a joint account with parents, who will have full access to help manage it.

A recent survey from Schwab showed that 70% of young people are “very” or “extremely” interested in investing. That’s consistent with Fidelity’s Youth and Money Study from 2023, which found that 75% of young people say investing is important to them, even if only 23% have started investing.

“We want to help new investors build good habits and prepare them for a lifetime of informed decisions and meaningful results,” said Jonathan Craig, head of financial services at Charles Schwab, in a post announcing the launch of the account.

Here are seven things young people and their parents should know about using a Young Investor Account before they get started:

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Education has been a big part of the Schwab Youth Savings Account since its inception. Once you sign up for an account, you’ll be rewarded with taking Schwab’s Quick Start to Stock Investing course within the first 45 days.

After completing the course, young people will get $50 invested across the top five stocks in the S & P 500. Schwab will invest $10 in limited shares across each of the top five stocks at that time.

The account bonus provides a financial incentive to help young people learn the basics of investing, but there are additional educational opportunities when using the account.

Newbies will have access to an educational series focused on four topics after opening an account: Financial Essentials, Investing 101, How to Invest in Stocks, and How to Trade at Schwab. From there, they can continue learning by accessing Schwab’s education center, which has videos and articles for new investors.

“It’s a very exciting time to be a new investor as there has never been greater access to markets, information, product selection and resources,” said Craig. “But greater access also brings greater complexity and the need to provide tools and education to help investors of all ages sort it out and make investment decisions based on their goals.”

Since the Teen Investor Account is a joint investor account for teenagers and parents, parents are encouraged to participate in their children’s investment journeys. And according to a recent Schwab survey, that’s what teenagers and their parents want.

Not only do 91% of parents want to help their children invest, and 73% believe it is “very important” for young people to learn about investing, but 87% of young people want their parents to be involved in helping them invest. They even say they trust their parents more than other sources of guidance.

Parents get involved from the start by starting the account application process. After the account is opened, young people can manage their money and investments on their own, but parents have full visibility of the account activities at all times. Parents and teens can add or withdraw money from the account.

Parents can also choose to open a debit card at signup, which is linked to the teen’s account. Young people can use the card to access any money saved in the account. Although there is no minimum to open an account, Schwab will not issue a debit card until the financial requirement of $100 is met.

Parents can set up spending alerts, and they should be the ones who open or close the bank card account.

There are many investment options that young people can choose from once their account is established and funded. There is no minimum balance required to start investing, and there are no minimum business requirements. There are also no account setup fees.

Available investments include exchange-traded funds (ETFs), mutual funds, fixed income products (such as US Treasury Bills and bonds), and shares. Youngsters can also choose from Schwab Investing Themes, which offer integrated investments in specific sectors, such as cybersecurity or AI.

Certain types of investments are prohibited within the account. These include online trading, options trading, trading in volatile currencies, FOREX, other investments, and more. Young people will not be able to receive cryptocurrencies through an account – although they can invest in exchange-traded products (ETPs) linked to the prices of cryptocurrencies.

Although the account reduces some of these risky investment options, it is still important for young people (and parents) to understand the risks of investing. Investments are not FDIC insured the way bank accounts are, for example. You can lose money on your investments, and markets change.

Read more: How to start investing – A step-by-step guide

There is some change in what parents and teenagers choose to do with that record as adults.

After they turn 18, young people can continue to use the account (until the age of 21) or transfer their assets to a regular trading account.

If teens and parents want to continue sharing the experience, they may choose to keep the teen’s account open for a longer period of time. Another option is to open a new joint merchant account.

Alternatively, young adults can take the investment principles they have learned and open their own trading accounts. If a new account is opened in their name, the parents may not own or have access to the juvenile’s account.

A Schwab joint account, along with a Fidelity account, offers options for young people to invest and receive financial education with the help of parents.

But that is not the only way that young people can start learning and practicing good money habits. A few other options for parents and teens to consider today:

• Savings account: Unlike a juvenile investment account, a custodial account (UGMA or UTMA) is fully established and managed by a parent or guardian. Parents can contribute and manage the account before their child has access, usually when they are 18 or older.

• Roth IRA: Roth IRAs are popular options for retirement savings — and they’re even available for kids. Parents can open custodial Roth IRAs for their earning children (which can range from a regular babysitting job to a part-time summer job) and manage the account until their child is an adult.

• High yield savings account: A high-yield savings account does not offer investment opportunities, but it can help young people save for the future. Today, the highest savings accounts earn over 4% APY. In addition, the deposit is insured by the FDIC, so there is no risk of losing the money.