NEW YORK -- Looking to draw in the next generation of investors, Fidelity Investments is launching a new type of account for teenagers to save, spend and invest their money.
The account is for 13- to 17-year-olds, and it will allow them to deposit cash, have a debit card and trade stocks and funds. The teens can make their own trades through a simplified experience on Fidelity's mobile app, with zero account fees or minimum balances, though the youth account requires a parent or guardian to have their own Fidelity account as well.
Fidelity's youth account will not put limits on how much or how often a teen can trade, though it won't let them buy or sell cryptocurrencies, stock options or ETFs that use borrowed money to supercharge gains and losses. Fidelity's hope is that parents and guardians will use the new youth account as a way to have conversations with their kids about how to safely invest for the long term.
“There is a lack of financial literacy,” said David Dintenfass, Fidelity's chief marketing officer and head of experience design. “People who are already Fidelity customers, they want to pass on their knowledge to their children. When we talked to them, they said they would love to have a product to develop better conversations with their children as soon as possible."
Fidelity began a pilot of the youth account program in the middle of 2020. While the sample size is admittedly small, only about a third of the pilot participants actually made trades. More of the teenagers in the pilot used their debit cards, 40%, said Jenn Samalis, senior vice president of customer acquisition and loyalty at Fidelity.
The youth accounts offer educational materials for teenagers about finances, and they will transition into a standard brokerage account after the child turns 18.
Nearly half of the money in the pilot accounts came from the teens themselves. Parents can monitor the teen's trading and spending activities with the youth account, but they cannot block transactions. That separates it from custodial accounts, which are widely available, where parents and guardians control the account until turning it over to the beneficiary.
"This is positioned as a way for parents to have good conversations with their children," Dintenfass said of the new youth account. “That, I think, has led to the ideas about responsibility, and that has led to responsible behavior.”