As our folks age or begin dealing with health challenges, it's a natural instinct for the younger generation to step in, particularly when it comes to financial management. Over time, an increasing number of teens and young adults find themselves wanting to assist a parent who may either lack confidence with online investing or does not have extensive experience in retirement planning.
That said, regardless of good intentions, it’s vital to understand that you can’t open or manage someone else's investment account without the proper consent. Financial establishments necessitate authorizations such as a power of attorney (POA) or a joint account to establish legal accountability for the account and to safeguard against fraud or misuse. Fortunately, top-performing online brokers make this process straightforward, providing easy-to-use tools, downloadable forms, and comprehensible educational resources to legally set up everything from the convenience of your home.
Teenagers cannot legally open investment accounts for their parents, at least not directly. Generally, you must be a legal adult (18 or older) to open an investment account. Even then, account management for someone else necessitates their authorization.
For a teen or young adult wanting to assist their parents, there are multiples ways to contribute. The legal age to enter contracts, including opening personal accounts or managing investment accounts for others, is usually 18. Until that age, teenagers are legally considered minors, which means they cannot sign binding financial agreements or act officially on behalf of another adult.
Once you turn 18, you can consider opening a joint brokerage account with your parent. However, remember that this comes with shared access and tax liability. To gain full control over a parent's investment account or make decisions for them, establishing a power of attorney is necessary.
If you're too young to open or manage an account for your parents, there are still ways to help. Beginning a dialogue about their comfort level and understanding of their investments can be a great starting point. Following this, you can assist in researching different investment platforms, sit with them as they set up an account, or help them understand complex investment terminologies.
Robo-advisors like Betterment or Wealthfront could be suggested as they regularly rebalance and maintain portfolios automatically. All these actions can be taken without official legal authority or being a partial owner of the account. You can simply be a trusted guide for your parent.
Once you're of legal age, you can open your own investment accounts and legally enter into financial contracts. But, to open an account under someone else’s name, consent or proper authorization like power of attorney is needed which provides the same access and decision-making authority as the account owner. Another option is a joint brokerage account that offers shared access but also includes shared tax liability.
Supporting parents with their investments is a noble act, especially if they are aging or uncertain about financial choices. Starting at 18, you have more options, such as becoming a joint account holder or establishing a power of attorney, provided, you have the proper legal authority. Through it all, it's crucial to respect boundaries, stay updated, and maintain open communication.