Fidelity Investments offers a wide variety of investment accounts and financial services, and now they cater to teens too. With the new Fidelity Youth Account, teens can spend, save, and invest their own money with a trusted corporation that’s been around since 1946.
This product just launched in May of this year, and you can expect to hear about it often in the coming months. The Fidelity Youth Account is a fee-free financial account with a lot of things going for it that’s great for young investors, and definitely one to consider as you look at account options for kids and teens. Will this be the youth brokerage account for you?
Who’s It For
Average age: 13 to 17
Good candidate: Teens who are serious about learning to invest and grow their wealth.
The Fidelity Youth Account is a brokerage account that teaches teens to manage and invest their own money. It provides them with real opportunities to buy and sell shares in publicly owned U.S. companies.
Children under the age of 13 are prohibited from having an account opened in their name, and new customers older than 18 may not open one either. When users turn 18, they are eligible to change their youth brokerage account to a standard brokerage account. Parents or guardians are removed from the account automatically.
Please note that only parents who already have a brokerage relationship with Fidelity to qualify for this product. A brokerage account, cash management account, or IRA with Fidelity would make you eligible for the Fidelity Youth Account.
Features and Benefits
In addition to being unique because it is a brokerage account rather than a typical checking account, the Fidelity Youth Account stands out from other financial products for teens because it gives teens more control than parents.
This is not a joint checking account—teens are the account holders and managers. Parents are there to supervise and support their kids, serving as the point of contact between them and Fidelity. All investment and spending decisions are to be made by the teen associated with the account, and they do not need the consent of their parent or guardian in most instances.
After opening an account for their child, the parent of a kid with a Fidelity Youth Account becomes known as the Interested Party for that account and hands over most responsibilities.
Parents are granted “inquiry access” to see how their child is spending their money and what they invest in. They are not asked to approve transactions or investments. Parents can set up alerts to receive real-time push notifications about spending activity and investing.
The parent is also the Trusted Contact in charge of communicating with Fidelity Investments. They are financially liable if their teen fails to make payments and can go to Fidelity with any questions or concerns about details of the account. They must also consent to certain privacy permissions that their child may enable such as Fidelity MyVoice.
This is essentially the extent of parent or guardian involvement, but parents do have ultimate say over account closures too. Parents must open this account for their child and they may close it or have their debit card deactivated. They reserve the right to request these things of Fidelity at any time.
Unlike other deposit accounts for kids, parents don’t have to be the ones to fund their children’s Fidelity Youth Accounts. They may fund it from their own Fidelity brokerage account, but they may go a different route.
There are many ways to fund this account, which can be done by either a teen or their parent. The parent may transfer money from a linked Fidelity retail brokerage account or the parent or teen may use any of the following funding methods:
- Wire transfer
- ACH transfer (if the teen is the account owner or a joint account owner)
- Mobile check deposit
- Paper check deposit
Teens can also link a digital payment app such as PayPal, Venmo, or CashApp and fund their account that way. If a teen is employed, they can set up direct deposit from their employer into this account.
Fidelity recommends against exceeding $30,000 in deposits in a year.
💸 Spend: Fidelity Youth Accounts, of course, come with debit cards. This is your average debit card, issued by PNC Bank, that can be used in-person or online for transactions and cash withdrawals. It can also be linked to payment apps like PayPal and Venmo for easy fund transfers. This debit card can be managed through the app and used anywhere Visa is accepted.
💰 Save: Teens can also save their money in their account by simply choosing not to invest it. Fidelity may move this money into a sweep account to earn interest, but it is never locked from teens. There is no charge for withdrawing and spending saved money.
📈 Invest: Teens are empowered to make all investing decisions for themselves, but users are limited to certain types of securities, chosen by Fidelity. The first type of security is exchange-listed National Market Securities or NMS securities such as stocks and ETFs. The second is Fidelity mutual fund shares, including Fidelity money market mutual funds, ZERO expense ratio index mutual funds, and municipal bond funds.
All other types of securities, such as international stocks and third-party mutual funds, as well as certain subsets of NMS securities are not able to be traded with a Fidelity Youth Account, but there is no shortage of options. There are no limits on the amount of money that can be traded in one transaction and teens can invest with as little as $1 at a time in fractional shares.
Teens may invest as actively or as passively as they’d like. They will not have an account manager making decisions for them, so they’ll need to do their own market research.
If a teen doesn’t know much about investing, Fidelity recommends that they go through the provided educational resources in the Youth Learning Center with their parents or guardians. These resources include articles that cover financial literacy topics in depth, from the basics of spending and saving to the nuances of investing.
Teens can talk with Fidelity investment professionals to ask questions about their account, but they will need to have a good understanding of the risks associated with investing to be successful with this account.
How Much Does the Fidelity Youth Account Cost
Fees: no fees for low balance, no account maintenance fees, no ATM fees, 1% fee for foreign transactions.
There are no subscription fees for the Fidelity Youth Account or other fees for using and keeping the account. However, there are investing fees. These are specific to each security a teen trades.
Users are reimbursed for fees they incur when using their Fidelity Youth Account debit card at any domestic ATM. There is no limit on reimbursements.
There are no minimum balance requirements for the investment account itself, but there may be some on different securities available for purchase.
Benefits of Fidelity Over Competitors
One of the great things about this account is that it empowers teens to actually invest. The Fidelity Youth Account is a much more comprehensive investment product than we’ve seen catered toward kids and teens before. Other deposit accounts for kids simply offer investing as an option, but on a much smaller scale and with far fewer options.
This account is also inexpensive compared to the competition. There are no subscription fees or account maintenance fees, and securities are mostly either low-fee or fee-free. Many are $0 commission and there are no fees for advisory.
It also pays to work with a high-profile financial services company like Fidelity Investments. Fidelity has a track record of success and high customer satisfaction.
Parents need to be Fidelity customers in order to open an account for their teens. A lot of people won’t be able to open a Fidelity Youth Account because of this, and Fidelity should consider opening it up to a larger population of interested candidates.
Because this is a proper investment account, there are going to be typical drawbacks to consider. For example, taxes. Your child will be responsible for paying taxes on their earnings and covering any fees associated with their investments. There is also the possibility that they may lose money, in which case they would need to cover their losses. If a child is unable to cover their losses or pay fees, their parent or guardian is financially responsible for them.
Another con to this account, for some families, is that it doesn’t give parents a lot of control. This is pretty much the point as this brokerage account is meant to give teens financial independence, but this might not be what you’re looking for if you want account management capabilities. For example, a parent may not set spending limits for their child.
As this is a new account offering, there are few consumer reviews available for it at this point. So, let’s take a look at what real customers have to say about working with Fidelity Investments as a whole.
Positive reviews about Fidelity Investments tend to center around the company’s extensive list of product offerings and helpful resources. Many Fidelity users today are long-time customers. Negative reviews complain about account restrictions, primarily in instances of suspected fraud, which can take a while to resolve.
The Fidelity mobile app is highly rated. It has a rating of 4.8 out of 5 stars in the App Store and 4.3 out of 5 stars on Google Play. The app is sophisticated and comprehensive but still easy to use.
Fidelity’s customer service is another strong point. They have a robust team of representatives working for them, and this results in short wait times and good rates of problem resolution. In a 2020 study by J.D. Power, Fidelity Investments ranked as the second best full-service investor for overall customer satisfaction.
Is It Safe
In terms of security, the Fidelity Youth Account is pretty safe. All account securities are SIPC insured up to $500,000 and uninvested account funds are insured up to $250,000.
Fidelity may share a teen’s personal information with third-party service providers and may use this information to make product suggestions.
It is up to a parent and their child to monitor their account for suspicious activity and report it to Fidelity promptly.
As for the safety of investments, this is, of course, not guaranteed. Fidelity doesn’t do anything to make the stocks a teen can invest in safer, so a child exposes themselves to the risks and losses any other investor does.
How to Sign Up
Again, you must have a brokerage account with Fidelity to submit an application for a Fidelity Youth Account. If you do, you can register for this account online or through the Fidelity app by providing identity verification for yourself and your child. Then, after your application has been processed, your teen can install the app, activate their account, and fund it.
If you value working with reputable companies and want your child to get started growing their wealth early, this account is probably one of your best options. The Fidelity Youth Account might be right for you and your family if you want to give your child real experiences with investing. And rather than having a limited range of companies to invest in and no control over how securities are traded, Fidelity Youth Account users can invest in the same companies that users with standard brokerage accounts may invest in.
Don’t let the fact that this account is new scare you away, as Fidelity has a reputation for delivering quality service and highly rated financial products. But if you’re looking for more parental control or you’re just not ready for your child to start investing yet, this account is not for you.